Broad Measures of Unemployment Rate Close to 18%
February 12, 2009
The unemployment rate in the United States was reported at 7.6% in the most recent release by the Bureau of Labor Statistics (BLS). As has been widely reported the staggering loss of jobs accelerated in the fourth quarter of 2008 pushing the total lost jobs to over 2.6 million for the year. The reports from the United States Department of Labor show widepsread job losses across nearly all sectors of the economy. However, what is not widely known is that the reported U-3 unemployment rate counts the people collecting unemployment benefits and not ALL the people who are in fact unemployed. Workers who have stopped looking for a job or have run out of benefits are not counted. In additon, unemployed farm workers, the idle self-employed, and workers in private homes are not counted in the government's U-3 unemployment number.
It would be nearly impossible (not to mention expensive) to do a full census to discover the true unemployment rate, but using a variety of measures economists are estimating that the number could be approaching 18%. Imagine a well-to-do working couple living in a near mansion. They have three domestic workers and three other workers tending to the farm on their estate. If the husband or wife lost their job and they were forced to sell their estate due to pressure, then seven people lost their jobs with all likelihood that not one of them would be counted in the oft-quoted U-3 unemployment rate. Economists have stated that the job sector of those working for themselves including the self-employed, freelancers, and small business owners has been especially hard hit during the recession. It is likely that these workers will not be as to quick to file for benefits and become part of the unemployment statistic as they are more likely to either wait out the recession or keep trying to salvage their previous business/career. Speaking of filing for benefits, media reports of crashing state computers and overburdended state government offices may also be reducing the number of people actually filing for unemployment.
Economists have noted that the broader measures of unemployment do track the U-3 rate. Looking at a chart of the unemployment rate on the website of the Bureau of Labor Statistics can help you understand just rapidly unemployment is accelerating and how that trend needs to be reversed. Many Americans were already worried that the unemployment rate was approaching one in ten, but armed with the knowledge that the broad unemployment rate is approaching one in five could provide more support for the Obama government job spending plans. The Keynesian approach to solving the unemploymnet problem which seems debatable at 7% may seem critical to many American at 18%.
