Even the experts can’t agree on a reliable unemployment figure

Even the experts can’t agree on a reliable unemployment figure

by
Mitch Coffman
August 4, 2012
Mitch Coffman
August 4, 2012

The good news is Idaho’s unemployment rate for June, 7.7 percent, is at its lowest point since the summer of 2009. That figure is known as the U3 number, a monthly figure that is commonly thought of as the state’s official unemployment rate.

The traditional unemployment figure that draws so much attention each month is generated by the Bureau of Labor Statistics (BLS), a unit of the U.S. Department of Labor. The U3 unemployment index is partially based on a monthly survey of 60,000 households, and counts only people who reported looking for work in the past four weeks.

The bad news is that the U6 number, a figure which IdahoReporter.com has been tracking for more than a year, is at 15.7 percent. U6 includes those people counted by U3, plus workers who have quit looking for a job, but are available, and those employed part time for economic reasons who had to settle for those jobs but really would like to work full time.

The number of unemployed persons in Idaho under U3 in June was 59,934. But using U6, the current figure is approximately 120,000. Nationally, the U3 unemployment rate for June was 8.2 percent, or 12.7 million persons unemployed. The U6 rate was 14.9 percent.

The difference between U3 and U6 has popped up in the current presidential race with the GOP insisting that true unemployment in the country is U6. Democrats say the traditional U3 number is the standard to use.

Brian Greber is director of the Boise State University Business Research and Economic Development Center. He feels neither the U3 nor the U6 number are valid measures. But Bob Uhlenkott, a researcher with the Idaho Department of Labor (IDL), believes the numbers are valid in tracking unemployment.

Greber says unemployment numbers are suspect and should not be taken at face value. “… I believe that all unemployment statistics are suspect and I don’t care for any of them.” He says that unemployment numbers “by and large are based upon surveys and individuals’ ‘self-proclamation’ of status. They are overused in general and largely misinterpreted.”
Greber feels that U3 numbers are more or less conjecture and, in his view, U-6 numbers “split hairs” as to what a quality job is or isn’t.

The best way to look at economic growth, says Greber, is to stop focusing on the unemployment numbers that are generated. “If you are looking to measure economic growth/decline, ignore all unemployment numbers and use numbers of people working, hours worked or aggregate real payrolls.”

Uhlenkott sees things differently. According to him, both measures of tracking unemployment numbers are acceptable; U6 numbers are simply broader. “Both the U3 and U6 numbers are accurate and reflect the best estimate of actual unemployment in the state. They are simply different definitions.”

Uhlenkott says there is more attention paid to the monthly U3 number than the quarterly U6 figure due to the costs involved in generating U6 data. “The main reason the U3 is most commonly used is the expense (larger sample sizes to come up with a U6 total) to generate such a figure on a monthly basis for small geographies like Idaho. To get the robust U6 rate on a monthly basis like the U3 would require much more sampling with a much greater price tag.”

The cost, he says, prevents a monthly U6 calculation. “With the limited and shrinking government coffers and the aversion to higher taxes, it is not likely the broader rates (U6) will be produced monthly for small geographies any time soon. It basically comes down to expense.”

Uhlenkott also notes that the BLS has a disclaimer for those viewing alternative measures for states, including U6. It reads, “The alternative measures for states are analyzed on a 4-quarter average basis in order to increase the reliability of the CPS (current population survey) estimates, which are based on relatively small sample sizes at the state level, and to eliminate seasonality. Due to the inclusion of lagged quarters, the state alternative measures may not fully reflect the current status of the labor marke

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