Public Comment

The Employment Situation: Bad News Disguised as Good News

Harry Brill
Friday November 09, 2018 - 02:37:00 PM

According to the recently released figures by the Department of Labor's Bureau of Labor Statistics (BLS), the national unemployment rate last month, which was 3.7 percent, is almost at full employment. In other words, virtually anyone who wants to work can find a job. The October rate is the lowest since 1969, which is 49 years ago. The California rate of 4.1 percent, although higher, is also considered low. In fact, in eight of the nine Bay Area counties, joblessness is below 4 percent.

However, these figures are suspicious. If the job market is as tight as the BLS and many in the establishment claim, wages would increase substantially because employers would be competing for scarce workers. As the San Francisco Chronicle acknowledges, wages are lagging, which is unusual when the economy is doing well. From the perspective of workers, the economy is not doing well. If all those who claim they want a job are counted as unemployed, the unemployment rate would be substantially higher. 

There is a problem obtaining an accurate count because the BLS employs criteria that excludes many workers from being defined as unemployed. Workers who report to interviewers that they haven't looked for work recently because they have been discouraged in their search are not counted as unemployed. Also, workers who have not actively attempted to find a job in the most recent four week period are not counted as unemployed. There could be good reasons why they haven't. But the BLS interviewers never inquire why. And students who want to work part-time but have been unable to find work are not counted as unemployed. But the BLS is very generous counting workers as employed even if they have barely worked. Anyone who has worked just one hour in a week is counted as employed, which tilts toward reducing the unemployment rate. 

The BLS nevertheless reports that over the years both the number of jobs and employees have increased. But the BLS does not report and discuss some of the illusions about the increase in jobs. Many employers have found it expedient to convert full-time jobs to two or three part-time jobs. Although the aggregate number of hours is exactly the same, the BLS reports a doubling or tripling in the number of new jobs. The number of involuntary part-time workers. which are employees who have been unable to find full-time work, has increased by almost 50 percent in the last ten years. 

For employers this conversion has important advantages. They are able to pay these employees lower wages and provide them with fewer, if any, benefits. According to the liberal think tank, the Economic Policy Institute (EPI), 6.4 million are involuntary part-time workers because they are unable to obtain full-time jobs. As the EPI explains, employers are shifting toward part-time work as the "new normal". 

Part-time male workers on the average earn about 20 percent less than full time employees. Women, who typically earn less than men on full-time jobs, are paid even less as part-timers. These involuntary part timers are five times more likely to live in poverty than full-time workers with similar jobs. The problem of being trapped in part-time work is disproportionately greater for Black and Hispanic workers. 

Moreover, these employees are much more likely to have work schedules that are not only variable from one week to another. Also, their schedules are often unpredictable. In short, they work fewer hours and experience a lot more misery. Since they are unable to obtain full-time jobs they should be counted in the BLS statistics at least as partially unemployed. Instead, they are statistically defined no differently than full time workers. 

To more fully evaluate how many workers who want a job are among the hidden unemployed, it is important to pay attention to the Labor Force Participation Rate (LFPR). This rate tell us what percent of the adult population is active in the labor force, that is, either working or actively seeking a job. In bad times the rate declines because many workers give up the search. In the last decade, beginning with the 2008 recession, the LFPR fell considerably, from 66.0 percent to 62.9. That's about ten million workers that are missing from the official unemployment rate. 

Although the official unemployment rate was 3.7 percent last month, the, BLS publishes in its monthly job report a more comprehensive criteria that includes involuntary part-time employees and its relatively modest estimate of discouraged workers. This would increase the official rate it to 7.4 percent last month, which is twice the BLS rate. If the BLS also included the ten million that are completely ignored by the BLS but nevertheless want to work, the unemployment rate would be in the double digits. 

But the unemployment problem is not only about how many workers lack jobs. Immensely important is how long the unemployed are out of work. Currently, 22.5 percent of the jobless are long term unemployed, which refers to workers who are unemployed at least 27 weeks. This high rate suggests that there are not as many available jobs around that the establishment claims. 

Yet the BLS and the establishment economists tell us that the economy is doing exceedingly well. And the mass media echoes the establishment line. A recent caption on the from page of the New York Times claims that the "economy hums" and that the October employment report is "Rosy". There is one large sector of the population that does not agree -- the many millions of workers who are trapped in poverty wage jobs and millions of others who have been unable to find any job at all.