December 3, 2010
The main measure of employment in the United States is the Current Population Survey conducted monthly by the federal Bureau of Labor Statistics. In a March 5, 2008 column in The New York Times, excerpted below, David Leonhardt described the birth of the survey, and its major shortcoming:
In 1878, Carroll D. Wright set out to do something that nobody in the United States had apparently ever done before. He tried to count the number of unemployed.
As is the case today, the 1870s were a time of economic anxiety, with a financial crisis -- the panic of 1873 -- having spread into the broader economy. But Wright, then the chief of the Massachusetts Bureau of the Statistics of Labor, thought there weren't nearly as many people out of work as commonly believed. He lamented the "industrial hypochondria" then making the rounds, and to combat it, he created the first survey of unemployment.
The survey asked town assessors to estimate the number of local people out of work. Wright, however, added a crucial qualification. He wanted the assessors to count only adult men who "really want employment," according to the historian Alexander Keyssar. By doing this, Wright said he understood that he was excluding a large number of men who would have liked to work if they could have found a job that paid as much as they had been earning before.
Just as Wright hoped, his results were encouraging. Officially, there were only 22,000 unemployed in Massachusetts, less than one-tenth as many as one widely circulated (and patently wrong) guess had suggested. Wright announced that his "intelligent canvas" had proven the "croakers" wrong. From Massachusetts, he went to Washington, where he served as the inaugural director of the federal government's Bureau of Labor Statistics and later as the head of the United States Census. His method for counting -- and not counting -- the unemployed became the basis for Census tallies of the jobless and, eventually, for the monthly employment report put out by the Bureau of Labor Statistics.
...
Over the last few decades, there has been an enormous increase in the number of people who fall into the no man's land of the labor market that Carroll Wright created 130 years ago. These people are not employed, but they also don't fit the government's definition of the unemployed -- those who "do not have a job, have actively looked for work in the prior four weeks, and are currently available for work."
...
There are only two possible explanations for this bizarre combination of a falling employment rate and a falling unemployment rate. The first is that there has been a big increase in the number of people not working purely by their own choice. You can think of them as the self-unemployed. They include retirees, as well as stay-at-home parents, people caring for aging parents and others doing unpaid work.
The second possible explanation -- a jump in the number of people who aren't working, who aren't actively looking but who would, in fact, like to find a good job -- is less comforting. It also appears to be the more accurate explanation.
...
There is no doubt that the unemployment rate is a less telling measure than it once was. It's simply no longer the best barometer of the country's economic health. A truer picture can be found elsewhere, by looking at compensation growth, for instance, or to changes in the percentage of the employed.
No less than Tom Nardone, the economist overseeing the unemployment survey, made a similar point. "Just saying the unemployment rate is 5 percent, without any other context, really doesn?t tell you much," Mr. Nardone said.
The main measure of employment in the United States is the Current Population Survey conducted monthly by the federal Bureau of Labor Statistics. In a March 5, 2008 column in The New York Times, excerpted below, David Leonhardt described the birth of the survey, and its major shortcoming:
In 1878, Carroll D. Wright set out to do something that nobody in the United States had apparently ever done before. He tried to count the number of unemployed.
As is the case today, the 1870s were a time of economic anxiety, with a financial crisis -- the panic of 1873 -- having spread into the broader economy. But Wright, then the chief of the Massachusetts Bureau of the Statistics of Labor, thought there weren't nearly as many people out of work as commonly believed. He lamented the "industrial hypochondria" then making the rounds, and to combat it, he created the first survey of unemployment.
The survey asked town assessors to estimate the number of local people out of work. Wright, however, added a crucial qualification. He wanted the assessors to count only adult men who "really want employment," according to the historian Alexander Keyssar. By doing this, Wright said he understood that he was excluding a large number of men who would have liked to work if they could have found a job that paid as much as they had been earning before.
Just as Wright hoped, his results were encouraging. Officially, there were only 22,000 unemployed in Massachusetts, less than one-tenth as many as one widely circulated (and patently wrong) guess had suggested. Wright announced that his "intelligent canvas" had proven the "croakers" wrong. From Massachusetts, he went to Washington, where he served as the inaugural director of the federal government's Bureau of Labor Statistics and later as the head of the United States Census. His method for counting -- and not counting -- the unemployed became the basis for Census tallies of the jobless and, eventually, for the monthly employment report put out by the Bureau of Labor Statistics.
...
Over the last few decades, there has been an enormous increase in the number of people who fall into the no man's land of the labor market that Carroll Wright created 130 years ago. These people are not employed, but they also don't fit the government's definition of the unemployed -- those who "do not have a job, have actively looked for work in the prior four weeks, and are currently available for work."
...
There are only two possible explanations for this bizarre combination of a falling employment rate and a falling unemployment rate. The first is that there has been a big increase in the number of people not working purely by their own choice. You can think of them as the self-unemployed. They include retirees, as well as stay-at-home parents, people caring for aging parents and others doing unpaid work.
The second possible explanation -- a jump in the number of people who aren't working, who aren't actively looking but who would, in fact, like to find a good job -- is less comforting. It also appears to be the more accurate explanation.
...
There is no doubt that the unemployment rate is a less telling measure than it once was. It's simply no longer the best barometer of the country's economic health. A truer picture can be found elsewhere, by looking at compensation growth, for instance, or to changes in the percentage of the employed.
No less than Tom Nardone, the economist overseeing the unemployment survey, made a similar point. "Just saying the unemployment rate is 5 percent, without any other context, really doesn?t tell you much," Mr. Nardone said.
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