How the Unemployment Rate is Really Measured

The unemployment rate stats just came out this morning.  It is reported to be steady at last months rate of 8.3%.  How the unemployment rate is factored is quite flawed, and the reported percentage is no where near what the title “unemployment rate” implies.

First of all, the Bureau of Labor Statistics (http://bls.gov) surveys just 60,000 households on a monthly basis.  The preferred method of contact is a landline.  So if you don’t have a landline, you probably won’t be surveyed.  Next, they ask you if you’ve worked for at least “one hour within the last 4 weeks.”  If you are unemployed, but were fortunate enough to spray perfume at the make-up counter at Penney’s for extra cash, and answer yes, you are marked as “employed”.    Even though you are unemployed and scrumping for side jobs, your honesty about one hour of work skews the unemployment numbers.  So even if you are employed part time, but it isn’t enough to support yourself or your family, you are counted as employed.

If you answer “no”, the next question is: “Are you actively seeking employment and ready to accept employment if it were offered?”  If you answer “yes”, you are counted as unemployed.  If however, you are medically injured  and incapable of accepting work until you heal,  or have returned to school, you are marked “not a member of the labor force”.  In that instance you would not be counted among the unemployed because you cannot or will not accept employment.

There is also a faction of people who have stopped looking for work.  That category is known as the discouraged worker, and they also are not counted as unemployed.  So the “discouraged worker”, the injured, the people that have returned to school,  and the underemployed, are not represented in the published unemployment rate.

When we see just 8.3% unemployment rate, the number of financially struggling is estimated to be at least twice that.