An accurate unemployment number depends on what measure you use

An accurate unemployment number depends on what measure you use

by
Mitch Coffman
March 5, 2012
Mitch Coffman
March 5, 2012

Traditional unemployment numbers published the last few months show that unemployment in Idaho is trending downward. That’s according to the normal U-3 numbers the federal and state government use. U-3 is total unemployment as a percent of the civilian labor force.

Then there are the U-6 figures, which include total unemployed, those who are underemployed, and those who are part-time employed, but want a full-time job. According to those numbers, during the last year in Idaho, unemployment in Idaho has stayed relatively the same.

But, to go back to the U-3 figure, the Idaho Department of Labor says in 2011 the jobless rate averaged 8.8 percent. By comparison, the federal Bureau of Labor Statistics says the U-6 number for Idaho in 2011 averaged 16.1 percent.

If one chooses to rely on the U-3 number, unemployment in Idaho in 2011 averaged 68,000 per month. By contract, the U-6 figure for the state puts the number at 98,600 per month. That is some difference, especially if you are one of the 30,600 counted by U-6, but ignored by U-3.

Two economists interviewed by IdahoReporter.com have similar ideas why the discrepancy in numbers and why the U-3 number is probably not an accurate barometer of unemployment.

Dr. Antony Davies, an economics professor for Duquesne University in Pittsburgh, Pa., and an economist for the Mercatus Center at George Mason University in Arlington, Va., says that U-6 is staying relatively the same because more unemployed people are taking part-time jobs. Davies also says that while he can’t say for sure why U-6 numbers aren’t falling as much relative to U-3 numbers, he does think there may be one major contributing factor.

“One major difference between part-time and full-time labor is that employers do not need to provide benefits for part-time labor. Obamacare not only requires employers to provide health insurance, but legislates the types of things that the insurance must cover,” said Davies. “This greatly increases the cost of full-time labor but does not impact the cost of part-time labor. So, firms respond by hiring part-time help.”

Monte Munn, an economics professor at Treasure Valley Community College, says he also believes the pending health care situation may be a cause for the U-6 numbers, but there are other factors as well.

Says Munn: “The Bureau of Labor Statistics that keeps track of that stuff keeps changing the common denominator so that the unemployment rate looks like it’s coming down when it really isn’t coming down. So you have to look at not only the unemployment rate, but you have to look at also the number of people that are unemployed, the number of people in the labor force and the number of people that are eligible to be in the labor force. And the people that should be in the labor force, the number keeps going up. So, the common denominator keeps changing. So, they’re cooking the books,” says Munn, in an effort to keep the monthly unemployment number as low as possible.

Munn agrees with Davies that Obamacare is a factor, but says there are other variables accounting for people falling into the U-6 category because they can only find part-time work. “That’s part of what’s causing the numbers to change. But also part of it is that they keep changing the way that they keep track of the numbers. So, you have a whole bunch of things going on simultaneously.”

Munn continues: “Obamacare is just one of the problems. You know, it’s like having a chain saw hit you in the ass and trying to figure out which tooth hit you. See, there’s not only Obamacare, but there’s also cap and trade, there’s also a whole bunch of other activities that have been imposed on the economy that are causing serious problems. And, Obamacare is just one of them.”

If there any way of knowing with more accuracy just what constitutes an accurate unemployment number? It is not an easy task, according to Munn. “There’s a lot going on (with regard to unemployment and the economy). You need about 15 eyes to try and keep track of all of it.”

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