A friend emailed a take on the hilarious Abbot and Costello skit, “Who’s on First?” In this version, one substitutes confusion over how to count the unemployed for the confusion in the skit over the names of baseball players. Apparently it is making the rounds of the Internet.
Here is a sample of a few lines:
COSTELLO: I want to talk about the unemployment rate in America.
ABBOTT: Good Subject. Terrible times. It's 9%.
COSTELLO: That many people are out of work?
ABBOTT: No, that's 16%.
COSTELLO: You just said 9%.
ABBOTT: 9% Unemployed.
COSTELLO: Right 9% out of work.
ABBOTT: No, that's 16%.
COSTELLO: Okay, so it's 16% unemployed.
ABBOTT: No, that's 9%...
COSTELLO: Wait a minute. Is it 9% or 16%?
ABBOTT: 9% are unemployed. 16% are out of work.
It goes on from there, but you get the idea.
It’s pretty funny, and it does bring up an important point on which labor economists and labor statisticians have spent a great deal of time. How do you count who is unemployed?
In order to count something you need a specific definition of what it is you are counting, otherwise as the saying goes you may end up comparing apples and oranges.
In the case of unemployment, one might count everyone in the population that is not working for pay. But that won’t really work, since there will always be people who in their present circumstances don’t want to work at a paid job, for example, elderly who are fully retired, full time students, or full time mom’s or dad’s caring for their children.
Labor economists and statisticians at the Bureau of Labor Statistics have settled on a definition of who is unemployed when calculating the “official unemployment rate.” The data used are from a monthly survey of respondents in a nationally representative sample of households in the United States.
The official definition counts a person as unemployed if they do not have a job, but have actively looked for work in the four weeks prior to the survey week and are who currently available for work. Persons who have a job are counted as employed. The number of unemployed plus the number who are employed add up to the number of persons “in the labor force.” All counts refer to persons 16 years or older in the civilian population. More details can be found at the BLS web page.
But the BLS statisticians don’t stop there. There is a wealth of data available from the monthly survey. The statisticians and labor force analysts use it to calculate and publish different measures of unemployment. For example, measures that include persons who have stopped looking for work because they believe no job is available, or that include persons who are working only part time but want to work full time.
While economists do pay attention to the “official unemployment” number, they also look at the alternative ways of counting labor market distress, and they are especially aware that in a recession some people become discouraged and quit searching for work, and, depending on your focus, these numbers should be included, since they sometimes make the recession look not as bad as it really is. They also know that as the economy recovers from a recession, some job seekers who had quit looking for work see or hear that the economy is getting better and they begin looking for a job again. Since not all these “added” workers will get a job immediately, this will sometimes make the recovery look as if it is not progressing as good as it really is.
As for the situation over the last year, all six of the alternative measures of labor market distress have declined. Not spectacularly, but at least they are moving in the direction that indicates labor markets are improving. For example, between January 2011 and January 2012, the official unemployment rate declined from 9.1 percent to 8.3 percent, seasonally adjusted, while the most comprehensive measure of unemployment, total unemployed (officially), plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force, went from 16.1 percent in January 2011 to 15.1 one year later.
Things really are looking better, but slowly.
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