Unemployment rate doesn’t tell the whole employment story, economist says

Unemployment rate doesn’t tell the whole employment story, economist says

Let’s say you are from one of the South Side’s more depressed neighborhoods, like Englewood. The unemployment rate in the Chicago-Joliet-Naperville area – the Bureau of Labor Statistics area for the region that includes Englewood – was 10.3 percent in June, a jump from the May unemployment rate of 9.3 percent.

These numbers are undoubtedly high. It’s been about five years since the economy crashed in 2008, and the recovery has been long and slow. But looking around at Englewood, where 40.6 percent of its residents live below the poverty line, according to the American Community Survey, an unemployment rate of 10 percent may seem not high enough.

That may be because many of the long-term unemployed, the people who are no longer looking for work, aren’t reflected in the unemployment rate. According to the Bureau of Labor Statistics, people are classified as unemployed if “they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.”

The unemployment rate is misleading, according to Heidi Shierholz, an economist at the Economic Policy Institute, a think-tank focusing the effects of inequality. “It’s misleading not because I think it is mismeasured,” said Shierholz, “but because when it shows improvement, it is often not because of workers finding work but because of people dropping out of the labor force.” With more than three unemployed workers for every available job, Shierholz said, the economic outlook is bleaker than a slight drop, or even a rise, in the unemployment rate really shows.

Instead, she suggests looking at the employment to population ratio to really understand the employment situation. It shows the share of the working age population that currently has a job. A Chicago Reporter analysis comparing changes over the past five years in the employment and the unemployment rates found that while the unemployment rate has changed as much as 4 percentage points, the actual employment rate has remained steady.

Source: U.S. Bureau of Labor Statistics

Source: U.S. Bureau of Labor Statistics

The data come from the Bureau of Labor Statistics annual averages for the State of Illinois. It also shows the differences among the percentages of African Americans, Latinos and white people in Illinois who were employed. Below is the employment rate for the last five years by race.

Source: U.S. Bureau of Labor Statistics

Source: U.S. Bureau of Labor Statistics

There are of course other ways to look at the employment picture, including growth in payrolls and an analysis of which industries saw job growth. Shierholz notes that it’s important to look critically at employment numbers to understand the real number of people without jobs, and make policy decisions accordingly.

“People are not unemployed because they don’t want to work, or because of benefits, or because people are just lazy,” Shierholz said. Rather, few available jobs that people are qualified for, or few available jobs in some fields altogether, are among the issues keeping the employment rate woefully low.

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  • The truth has been a long time coming.

    So, is this still George Bush's fault?

    I'd suggest the government interference at all levels of the economy, with increased regulations, higher taxes, and the disaster of the Affordable Care Act looming, have kept businesses from expanding and creating jobs.

    Not to mention the 67% increase in the Illinois income tax.

    Nothing will change until voters understand that the main thing standing in the way of job development is government.

    Government says better not to have a Wal-Mart and its jobs and lower prices than to have one in Englewood or West Lawn or Roseland or similar. Yet this government will be voted in again and again, and, no doubt, the "Muckrakers" will support the same old same old party line.

  • Mr. Davis, progressives do not have the categories of thought to process such associations. Your rational just sounds like a piercing sharp wail that they must close their eyes and ear to.

    Can you imagine if they were to one day wake from their unconscious blissful slumber and realize the atrocities they have created through their unintended consequences?

    We'd be talking a lot of poor souls away from the cliff.

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