Counting the Invisible Unemployed
Counting the Invisible Unemployed to Determine the REAL Unemployment Rate
On June 3, 2011, the Bureau of Labor Statistics (BLS) reported that only 54,000 jobs had been created in May – far below the 200,000 needed just to keep up with population growth – and raising the prospect of a Double Dip Recession. The unemployment rate among those actively seeking work was 9.1%. Among total workers, including those who have given up looking for work, the unemployment rate was over 16%. The vast majority of these workers have been unemployed for more than 6 months. http://www.bls.gov/news.release/empsit.nr0.htm
But the BLS estimate is based on a household survey and surveys are known to be inaccurate due to “favorable response bias”. People do not want to admit that they are unemployed and unemployed are less likely than employed to even answer the phone and complete the survey in the first place. So if these numbers are known to be inaccurate, what other more objective measures can be used to determine the real unemployment rate?
In this report, we will show that the REAL unemployment rate is about 27% - three times the official reported rate of 9%. Even more ominously, we will show that the REAL unemployment rate for young adults is about 53% - more than TWICE the official unemployment rate for young adults of 24%. The reason the REAL unemployment rate is so much higher than the official unemployment rate is due to the BLS practice of not counting millions of “Invisible Unemployed” working age adults.
What is the US population age 16 and over and what is the monthly rate of growth?
Ideally, the real unemployment rate is the number of unemployed workers divided by the number of workers in the workforce. The number of workers in the workforce in turn is related to the growth in the total US population which is age 16 and over. So this is where we will begin.
BLS Table A1 for the past 10 years notes that the total population age 16 and over is currently 239 million and has grown from 214 million 10 years ago. This is 25 million over 10 years, 2.5 million per year or 210,000 per month. In the past 3 months, this rate of growth has slowed to about 160,000 per month. But not all of these 160,000 adults actually enter the paid workforce at age 16. Some continue in school (although the number entering and leaving high school and college each year should balance out). Some become full time caregivers for their children. So the next question is what percent of the population actually enters the workforce – by needing and looking for a job?
What current US workforce population and what is its monthly rate of growth?
This question is troublesome because its answer typically relies on BLS survey data which is known to be inaccurate. Here is the official answer from the BLS: The Labor Force today is estimated to be 153 million and 10 years ago, it was 143 million. So it has officially grown by 10 million in 10 years or 1 million per year or about 83,000 per month. Recently, the Labor Force growth rate, according to the BLS monthly survey, has slowed to 70,000 per month.
This would mean that 90,000 adults out of 160,000 adults per month – over half of all adults - are NOT entering the Labor Force! This is clearly not accurate as only 80,000 of the 160,000 are women and fewer than half of all women have children and over half of these are in households where both parents are working. So it is far more likely, that growth of the Labor Force is 140,000 adults per month – or DOUBLE the BLS estimate of 70,000 per month.
The BLS claims that the percent of adults in the work force has declined from 64% to 58% in the past 10 years. However, there are many fewer women today having children than 10 years ago. Also, there is a much higher percent of women with children who are working today than were working in the past. So the percent of adults in the work force should be going up, not down.
One percent of the population is 2.4 million. So a 6% error is 14.4 million adults who should be or would want to be in the work force but not counted by BLS – just since 2001.
It is therefore likely that the actual Work Force, including all two – wage earner families - is much higher that 153 million. Given that the BLS method under-estimates the work force by 70,000 per month or 840,000 per year, over the 50 year lifetime of the workforce, the actual workforce is likely to be 153 million plus 40 million or about 193 million adults – leaving only 46 million adults who are not in the work force. Put another way, the BLS claims that only 60% of all adults are in the work force, when the actual number is closer to 193 million divided by 239 million = 80% of all adults. The BLS is simply not counting 40 million adults and its estimate is becoming increasingly inaccurate every month. This is why we must seek out more accurate assessment measures than merely calling folks on the phone, hoping someone answers and then hoping they will tell us the truth.
This strange unexplained drop in the work force in the past 10 years, and mainly in the past 3 years since the beginning of the Great Depression has not gone un-noticed. For example, AP reporter, Paul Wiseman wrote an article on June 2, 2011 called “The Incredible Shrinking Workforce Presents an Economic Puzzle.” http://www.chron.com/disp/story.mpl/business/7593297.html
“Where did all the workers go?...Since November, the number of Americans counted as employed has grown by 765,000, to just shy of 139 million… But the number of Americans counted as unemployed has shrunk by much more - almost 1.3 million - during this time. That means the labor force has dropped by 529,000 workers.”
Note that the 529,000 decline in the number of workers over 7 months is very close to my estimate that the BLS survey is under-counting the work force by 70,000 per month. So the answer to his question of where all the workers went is simple. They are all still there. But they are simply not being counted. Thus, it would be accurate to call these millions of Americans who are not being counted the “Invisible Unemployed.”
How many adults are unemployed?
In early 2001, according to the BLS, when Bush II took office, there were about 6.5 million unemployed. This rose gradually until the end of Bush II when it skyrocketed to 14 million. Since Obama took office, his federal stimulus program was able to reduce the number of unemployed to 14 million. Thus, Obama can rightly claim to creating at least 2 million jobs since he took office.
But unfortunately, the BLS survey is not even remotely accurate. For example, the workforce population increased by over 5 million since 2009. For the number of unemployed to drop to 14 million, Obama would have needed to create 7 million jobs. This obviously did not happen. When Obama took office in early 2009, the number of unemployed was skyrocketing. His federal stimulus program did reverse this trend by 2010. But the number of unemployed today is about the same as it was when Obama took office.
How many adults are currently employed and what is the rate of growth in employment?
While the number of unemployed is hard to estimate, the number of employed is much easier to estimate and is likely to be much more accurate. We now have 140 million employed – about what we had in 2005 and only one million more than the low point in 2009 and 2010. But we have gained 2.5 million adults per year since 2005 – meaning 15 million more people without any more jobs.
So it is not merely that we lost 7 million jobs during Bush II’s final year in office. It is that we have 10 million more people than in 2007. We have lost millions of jobs while gaining millions of people. Looking more closely at the number of jobs since Obama took office in 2009 shows that only a very small amount of progress has been made in terms of creating jobs:
We have about one million more jobs than when Obama took office. But we have at least 5 million more working age adults. This means we have about 4 million more unemployed workers than we did when Obama took office. While Obama stopped the downward spiral, it has not led to a recovery.
An important question is who are these 4 million “invisible unemployed” working age adults and why are they not being counted? That is what we will look at next.
Invisible Unemployment impacts Young Adults Most Severely
It is apparent by the fact that the adult population is increasing while the work force is not that most of these 70,000 invisible workers each month are young people – who are not entering the work force at all.
Population The Young adult population, age 16 to 19, has only increased slightly from 16 million 10 years ago to 17 million today. The age cohort per year has remained about 4 million. This means the Age 20 to 25 bracket has about 4 million times 6 years equals 24 million. The total number of young working age adults is about 40 million.
Labor Force However, while the number of young adults, age 16 to 19, rose by about 100,000 per year, the Labor Force for this same age bracket has declined dramatically from 8 million in 2001 to 5.3 million today.
Accounting for
It is likely that about half of the 16 million young adults aged 16 to 19, or 8 million, were full time high school or college students. This is an optimistic assumption in that it would mean there was not a single “invisible unemployed” young adult in 2001. Using this same ratio in 2011 would mean that 8.5 million of the 17 million current young adults are still full time students. Since 5.3 million are accounted for in the visible workforce, 3.2 million are part of the “invisible unemployed.” Thus, the actual work force for ages 16 to 19 today is not 5.3 million, but 8.5 million.
Employment of young adults ages 16 to 19 has also declined dramatically, from 6.7 million in 2001 to 4 million today. But despite this 2.7 million decline in employment and 1 million rise in population, the “official” number of unemployed young adults remained at 1.3 million!
In fact, the true number of unemployed young adults currently is 1.3 million PLUS 3.2 million equals 4.5 million – three times the number reported by BLS. In 2011, out of 17 million young adults, nearly one in four were “Invisible Unemployed Workers”.
While the “official” unemployment rate for young adults was 15% in 2001 and 24% today, the actual unemployment rate for young adults in 2001 was 16% and today it is a very sad 53% - more than DOUBLE the official unemployment rate for this age bracket! One out of every two young people ages 16 to 19 who is not in school is currently unemployed.
Sadly, the numbers are almost as bad for young adults ages 20 to 24. There are about 6 million college students in the
Nor is there any recovery in sight for these young people. For example, between January and February 2011, there was a widely hailed gain of 250,000 jobs (still barely more than the 160,000 gain in working population that month). However, breaking these new jobs down by age group, 278,000 went to workers over the age of 25. Workers between the ages of 16 to 24 actually lost another 28,000 jobs!
Since the peak of employment in 2007, there have been 7 million jobs lost. Young adults age 16 to 19 accounted for 1.6 million of those job losses (or one in four of all jobs lost). Young adults age 20 to 24 accounted for another million in job losses. Altogether, young adults age 16 to 24 accounted for 2.6 million of the 7 million lost jobs – or 37% of all jobs lost – even though these young adults account for only 13% of the total labor force.
What is happening to all these young adults entering the Labor Force age without actually entering the Labor Force statistics?
While many of these young adults are going to school, the fact is that with the dramatic rise in tuition rates, many young adults going to school are also working – just as many young mothers taking care of children are also trying to get a job. These days, having everyone working is the only way to keep from going massively in debt.
Also with the huge cuts in State support for colleges and universities (such as in the case of Washington State where more than 500 million dollars was cut just this year), there are going to be fewer teachers, fewer students and even more debt for the students who remain. Even those with College degrees are finding it almost impossible to get a good paying job.
There is a new term used by young adults who can not find jobs. It is called “couch surfing” – which is the modern equivalent of “riding the rails” - which is what many young people did during the Great Depression when they too could not find work. The Official Unemployment Rate for young adults is 24%. However, as we have shown above, it is more likely to be closer to 76%.
In short, we are losing an entire generation of young adults with little to no hope of getting a job, building a career, buying a home and starting a family. With college tuition rates skyrocketing, many young adults are left with no option at all other than to sleep on someone’s couch. Even those lucky few who do get in to college can not find a good paying job when they get out and instead are saddled with a mountain of debt which they can not possibly pay back.
Why are young adults having such a hard time finding a job?
We have shown that the real unemployment rate for young adults may be 3 times has high as the official unemployment rate. There are two underlying reasons for so many young adults being invisible. The first is that the lack of jobs is so severe that this age group is having a hard time even finding their first job. There are an abundance of highly qualified and highly experienced middle age workers. Why would any employer want to higher a young person who has NO EXPERIENCE at all?
The second is that without getting that first job, there is no unemployment insurance to apply for. One has to have a job just to be part of the Labor Force. Repeated rejections and never having the experience of a first job leads many young people to believe that getting a job is all but impossible. Instead, they wind up spending their time sleeping on someone else’s couch.
What is the REAL unemployment rate for all workers?
We have shown above that the actual workforce is about 193 million. We have also noted that the current BLS survey shows that about 140 million currently have jobs. This means that as many as 53 million do not have jobs – three times higher than the 15 million figure commonly reported to not have jobs.
Thus, the real unemployment rate may be as high as 53 million divided by 193 million or 27%.– three times the official unemployment rate of 9%. Put another way, it is possible that one in four adults is unemployed.
How can the official unemployment rate be so far off?
The answers seems to be in the lack of interest on the part of the BLS in determining what adults are doing who are not working – and why they are not working. Subtracting 15 million known unemployed – folks who are currently actively looking for jobs, even though those jobs do not exist, - from 53 million likely unemployed leaves 38 million discouraged “Invisible Unemployed”. Of these, over one in four are young adults between the ages of 16 to 24 who are still waiting for their first job.
The questions we as a civilized society need to ask are these:
How much longer are we going to make these thousands of young adults wait?
How high does the unemployment rate have to rise before we demand that billionaires and wealthy corporations pay their fair share of State and federal taxes so that we can provide this generation of invisible young adults with jobs and hope for a better future?
As Mahatma Gandhi once said, “The first step in achieving justice is making injustice visible” … When will we take that first step towards justice and good jobs for all?
Sadly, things are likely to get much worse in the coming months. The last of the federal stimulus funding jobs will end on July 1st. On this same day, billions in State budget cuts will lead to the firing of thousands of workers. In addition, the federal reserve is cutting back. Then in August, there is the looming possibility of a federal government shutdown costing perhaps millions of jobs. Rather than a recovery, we could be heading for another Great Depression.
If you would like to learn more about the underlying causes of our unemployment problem and how you can help us create hundreds of thousands of jobs, visit our website: coalitiontocreatejobsnow.org.
Regards, David Spring M. Ed.
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