WEEKEND READ: The hidden jobless

The unemployment rate in the United States doesn't really look that bad – until you consider the vast number of workers who are underutilised and not contributing to the economy at large.


It's hard to overstate the poor numbers coming out of Wall Street in recent months. But could it be that we're overstating the gravity of the situation? As job losses have mounted and consumer confidence has plunged, policymakers, news organizations, econo-pundits, and even some of my Slate colleagues have noted that the unemployment rate, which rose to 6.1 per cent in September, seems to be at a non-recessionary, non-catastrophic, low level. The unemployment rate is still below where it was in 2003; and between September 1982 and May 1983, the last very deep recession, it topped 10 per cent.

But maybe the employment data are much worse than they seem. In the past year, the two key measures of employment – the unemployment rate and the payroll jobs figure – have been poor but not awful. The unemployment rate has risen from 4.5 per cent a year ago to 6.1 per cent. And in the first nine months, 760,000 payroll jobs were lost. This is unwelcome but not catastrophic. So why do things feel so bad? It's not because we're a nation of whiners. And it's not a matter of columnists and spin doctors shading the numbers to make things look worse.

Rather, these two figures are under-measuring the weakness in the labour market. By some measures, in fact, the job situation is worse than it has been at any time since 1994.

Here's why. Back in the 1990s, the Bureau of Labour Statistics recognized that in a changing economy, in which outsourcing, self-employment, and contracting were becoming more commonplace, the traditional methods of measuring unemployment and job growth might not accurately portray the economic situation. And it knew its methodology had some quirks – the unemployment rate doesn't account for people who have given up looking for jobs, or who have taken themselves out of the work force. So since 1994, the BLS has been compiling alternative measures of labour underutilisation. There are many different varieties of labour underutilisation. There are marginally attached workers: "persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past." There are discouraged workers, a subset of the marginally attached crowd, who have "given a job-market related reason for not looking currently for a job." There are people who work part-time because they can't find – or their employer can't provide – full-time work. There are people who have left the work force entirely. Neither the unemployment rate nor the payroll jobs figure captures the plight of many of these folks.

And the alternative labour underutilisation measures show a lot of stress. The data on people not in the work force show the number of people not looking for work because they're discouraged about finding jobs has risen from 276,000 in September 2007 to 467,000 in September 2008 – up 70 per cent. The percentage of people unemployed for more than 15 weeks stood at 2.3 per cent in September 2008, up from 1.6 per cent in September 2007, a rise of nearly 45 per cent. But the most troublesome is the U6. The U6 is sort of the summa of job angst, a shorthand tally for the aggregate of job-related frustration. To compile the U6, the BLS takes the number of unemployed, plus all marginally attached workers, plus all of those employed part-time for economic reasons, and then calculates that total as a percentage of the sum of the entire civilian labour force plus marginally attached workers.

The U6 in September rose to 11 per cent, its highest level since the data series started in 1994 and significantly higher than it was in the last recession, in 2001. The ratio between the U6 and the official unemployment rate has remained relatively steady over the last several years. But that means that as the unemployment rate has risen, so too has the portion of the population suffering from other types of work deficits. Three years ago, when the unemployment rate was 5.1 percent, an additional 3.9 percent of the labour force fell into one of those other underutilised categories. Last month, with the unemployment rate at 6.1 per cent, an additional 4.9 per cent of the labour force was underutilised.

Add it up, and more than 10 per cent of American workers are essentially not contributing full-time to their families' well-being and to that of the economy at large. The unemployment rate may still be historically low, but the underutilisation is historically high.

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