Figuring Out the Jobs Numbers

Rubic's Cube
Photo:  Toni Blay

So – week after week we get updates on the nation’s unemployment numbers.  Right now, 9.3% unemployment is the reigning figure.  So that means 9.3% of the country is unemployed, right?  Ah, no.  It’s much more complicated than that, and the picture gets worse for job seekers when you look at the numbers for everyone looking for a job.

First – what figures do we see?

Last week the unemployment number fell to 9.3%, but initial job claims were up 35,000 – above even the highest estimates, while continuing claims were down.  Wait, what?

Let’s define the first two – jobless claims (initial and continuing) and the unemployment rate.  Then we’ll define a few other terms and explain why that 9.3% number is bullshit.

Jobless claims, or unemployment insurance claims

The US Department of Labor releases the Unemployment Insurance Weekly Claims Report, well, every week.  That report is an overview of how many people file for unemployment benefits, broken down by state because each state has its own unemployment insurance.

–          There are initial claims (for people beginning a period of unemployment and filing for unemployment benefits) and continuing claims (for people who qualify for benefits and are counted in the insured unemployment figures – basically people continuing to apply for unemployment checks).
–          For example, for the week ending January 8, 445,000 people were seeking initial unemployment benefits (an increase of 35,000 from the previous week).  That’s bad – most people thought it would be more like 415,000.  But continuing claims fell by 248,000 – that’s a positive thing, but that still means there were still 3.879 million continuing claims.

Where does the money come from to pay these claims?  To oversimplify, each state has its own unemployment insurance pool, funded by employers each payroll period.  This is part of the payroll tax your employer pays on top of your salary. They also pay into a federal pool, for different unemployment benefits (like the current federal extended unemployment benefits).  Again, federal and state unemployment insurance is just part of the payroll tax, which also includes Medicare and Social Security payments.  The take away here is that it is EXTREMELY expensive to have employees, and this doesn’t include any benefits like health care.

“The Unemployment Rate”

This is the number we see thrown around most often, probably because politicians and reporters need easily digestible figures for voters and readers, respectively.  Remember how you’re eyes glazed over after one minute of that paragraph about unemployment insurance? Exactly.

So – 9.7%, 9.3%, 9.8% what does it mean? (Incidentally, Moody’s says it will be over 10% in 2011)

The DOL says an unemployed person is someone who does not have a job, has actively looked for work in the prior four weeks, and is currently available for work.  This is the only definition the government uses for unemployment. As of this writing, January 13, 2011, the national unemployment rate was 9.3%.

Now – this number is so incomplete that it shouldn’t even be used.  It’s literally for sound bite purposes only.  If you asked how old I was, and I gave you a number that excluded my teenage years, you’d call me a damn liar, and you’d be right.

So if I’ve been out of work for six months, but in the last four weeks I finally gave up looking for work and started collecting unemployment benefits (explained above) – I’m not unemployed? Please. And there are lots of people like this – about 2.6 million in December, actually.

Obviously lots of economists hate the “national unemployment rate” number because it’s so incomplete, so the government does issue the scintillatingly titled “Alternative measures of labor underutilization (U-1 through U-6).”  This takes into account broader measures of unemployment, which we’ll discuss below, but which do not impact the national unemployment rate.

The Not-Officially-Unemployed

Then there are the marginally unemployed (2.6 million described above) – people who were not employed, were looking for work in the past 12 months, but stopped within the last four weeks, the involuntary part-time workers (8.9 million), and those who have simply stopped looking for work because they believe there are no jobs.  Taken together, the total unemployment figure is more like 16.7%. So – if you thought the job market was bad at 9.3%, you were right, but that’s only half the story (OK, a little more than half).

16.7% of the people who want a full-time job can’t find one.   That figure is startling A) because it’s nauseatingly high and B) because we mostly see the bullshit “official unemployment” number, leading people to believe the employment situation is better than it is.  At 16.7% it’s much worse, and we’re not done yet.

Are the unemployed or underemployed the only people looking for a job?  Well, do you know anyone who hates their current job and is looking for something better?  Yeah – the un/under employed are not the only ones looking for jobs.  According to a survey by Jobvite, there is an additional “hidden pool” of job seekers, roughly two-thirds of currently employed Americans are actively seeking a job or being open to new career opportunities.  They go on to say that this brings the number of job seekers from 33 million to 110.5 million.*

*[I’m not sure how they get 33 million to start.  16.7% of the labor force (in the United States, about 154 million people) is about 26 million unemployed job seekers.  Either way, 2/3 of employed Americans is a big number.]

If you’re looking for a job, you have that 16.7% of the labor force to compete with, and then about two-thirds of employed people looking for jobs too.

Why all this doom and gloom? Because I’m a realist, and I can’t stand sugar coating and subterfuge.  No one benefits from thinking the unemployment number is 9.3% except for incumbent politicians.  People need to know what a jungle it really is out there.  If you are unemployed and looking for work, you better be damn sure you know what you’re up against and do everything you can to win.  If you go into an interview over-estimating your chances, and as a result put in less time and prep effort, you lose.  Trust me, it’s better to know the hard facts and act accordingly than it is to live in some dream world.

Given this total downer of a post, my next post will be about hustling and what to do to get ahead (based on a great webcast I saw last night featuring Noah Kagan).

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Tim Murphy is the founder of ApplyMate.com - the first free web app to help you track school and job applications.

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