why can the unemployment rate be misleading? course hero

Why is unemployment worse than the official rate suggests?

The true percentage of people who don't have jobs or aren't making enough money is often worse than the official unemployment rate suggests because the Current Population Survey (CPS) doesn't collect certain information from those surveyed.

What was the unemployment rate in April if you were misclassified correctly?

The same misclassification phenomenon occurred in April, too — the official 14.7% unemployment rate would have been nearly 20% if furloughed workers had been identified correctly, the BLS said.

Is the unemployment rate an accurate measure of joblessness?

The unemployment rate isn’t an accurate measure of joblessness simply because it doesn’t consider everyone who doesn’t have a job. That’s why many economic experts instead focus on what’s known as the real unemployment rate.

What would happen to the unemployment rate if the government furloughed workers?

The unemployment rate would likely rebound faster in this eventuality than if the layoffs were permanent. The same misclassification phenomenon occurred in April, too — the official 14.7% unemployment rate would have been nearly 20% if furloughed workers had been identified correctly, the BLS said.

Viable system

I agree there needs to be a finite amount of time before a person’s unemployment benefits expire. But along with unemployment benefits, there needs a viable system in place to help train those that want to work in a field but don’t have the needed skills.

More experienced workers

For those of us (me included) who are a specific ‘age’, we acknowledge there are many biases that hinder our individual job searches. Many employers won’t hire someone who’s out of work; others will find ways to not hire an older person by questions they ask and by how they phrase a job description.

Conclusion

We all can agree to disagree on how we got into this situation – but pointing fingers and grandstanding isn’t going to change anything soon. Emotions run high and there are some simple ways that we can fix things as long as we acknowledge the system is broken and not point fingers and play the ‘blame game’.

By Kenneth Lang

Kenneth Lang is a social media analyst who has worked with job seekers and small business owners on how to best maximize using LinkedIn for specific goals.

Why is unemployment rate so misleading?

Unemployment rate can be 'misleading' because of labor force dropouts, Yellen says. Fed chief says dropouts played a role in the decline in the unemployment rate in past years. (Melanie Maxwell /The Ann Arbor News via AP) F ederal Reserve officials have long been concerned that the official unemployment rate might be a "misleading indicator" ...

Does Trump have a doubt about unemployment?

Trump has long raised doubts about the official unemployment rate, although the White House has expressed confidence in the Census Bureau's numbers since Trump took office. The Census Bureau conducts the survey for the Labor Department.

Did Yellen's quitters lower unemployment?

As a result, large numbers of quitters artificially lower the unemployment rate. On Monday, Yellen allowed that such a dynamic played a role in the decline in the unemployment rate in past years, although she said it was hard to know how just how significant that role was.

Why is unemployment not an accurate measure of joblessness?

The unemployment rate isn’t an accurate measure of joblessness simply because it doesn’t consider everyone who doesn’t have a job. That’s why many economic experts instead focus on what’s known as the real unemployment rate.

What is discouraged worker?

A discouraged worker is an example of a marginally attached worker. Other marginally attached workers aren’t in the labor force because they haven’t looked for work in the past month for various reasons (even though they have looked for a job in the past year).

Does unemployment separate part time and full time?

It Doesn’t Separate Part-Time and Full-Time Workers. Another problem with the official unemployment rate is that it doesn’t consider the quality of jobs that workers have. People are considered employed if they have part-time or temporary jobs.

Is discouraged work included in unemployment?

1. It Doesn’t Account for Discouraged Workers. Discouraged workers aren’t included in the official unemployment rate. These are the adults who’ve looked for jobs at some point in the past 12 months, but not in the four weeks before the Bureau of Labor Statistics (BLS) conducts its monthly survey of households.

What is unemployment in BLS?

For the BLS, unemployment is the state in which one has no job and has been looking for work for the past month. Those who have stopped job searching are not counted as part of the unemployed labor force. Unemployment may be classified as either a frictional, structural, cyclical, or demand-deficit type. 1 . ...

Why is unemployment cyclical?

If they don't expect sales to pick up anytime soon, they must lay off workers. The higher unemployment causes consumer demand to drop even more , which is why it’s cyclical. It results in large-scale unemployment. 6 Examples include the financial crisis of 2008 and the Great Depression of 1929.

What are the causes of frictional unemployment?

Four Causes of Frictional Unemployment. One cause of unemployment is voluntarily leaving the workforce. Some of the unemployed have saved enough money so they can quit unfulfilling jobs. They have the luxury to search until they find just the right opportunity. The second cause is when workers relocate.

What is structural unemployment?

This type of unemployment is when employees leave their job to find a better one. Two causes create structural unemployment. That is when workers' skills or income requirements no longer match the jobs available. The seventh cause leads to cyclical unemployment. 1. Frictional and structural unemployment occur even in a healthy economy.

Is structural unemployment voluntary?

Structural unemployment is neither voluntary nor short-term. These next two causes lead to long-term unemployment. The fifth cause is advances in technology. This is when computers or robots replace workers. Most of these workers need more training before they can find a new job in their field.

Does BLS count as unemployment?

If someone gives up looking for work, on the other hand, the BLS does not count them in the unemployment rate. If someone retires, goes back to school or leaves the workforce to take care of children or other family members, that is not unemployment because they no longer look for work.

How many hours of unpaid work are required for a survey reference week?

All persons who worked for pay or profit during the survey reference week. All persons who did at least 15 hours of unpaid work in a family-owned enterprise operated by someone in their household. All persons who were temporarily absent from their regular jobs, whether they were paid or not.

Is unemployment rate bad?

Unfortunately, this often means that the true percentage of people who don't have jobs or aren't making enough money is often worse than the official unemployment rate suggests.

Does BLS count as unemployed?

The BLS only counts as unemployed those who "do not have a job, have actively looked for work in the prior four weeks, and are currently available for work.". If you have a cold (known as a "temporary illness"), you are still considered available for work by the survey. 2 .

Is the CPS a measure of unemployment?

Clearly, the CPS is an important measure, but it can't tell us everything about the state of unemployment in the U.S. Here are some factors that impact workers in the U.S. but are not accounted for in the CPS.

Why doesn't unemployment include the share of people who dropped out of the labor force?

The unemployment rate also doesn’t include the share of Americans who dropped out of the labor force because they were discouraged and decided not to look for work, for example. A large share of people leaving the labor force would make the unemployment rate appear artificially low.

Why is unemployment a sign of hardship?

That’s because an unemployed person’s income drops after losing a job.

What was the unemployment rate in June?

The unemployment rate fell to 11.1% in June, exceeding expectations as U.S. businesses added a record number of Americans to their payrolls.

Why is unemployment insurance a temporary stopgap?

That’s because an unemployed person’s income drops after losing a job. Unemployment insurance generally provides a temporary stopgap, but these state-administered benefits often replace less than half of prior wages. Many workers also aren’t eligible for jobless pay.

How many people were unemployed in June?

Nearly 18 million Americans were unemployed in June. And the employment situation soured far more quickly than at any other point in history, doing so over the span of a few months. By comparison, it took more than a year for the Depression-era unemployment rate to witness an equivalent rise.

Is the $600 unemployment increase a federal law?

Squawk Box. A recent federal financial-relief law greatly increased unemploy ment benefits for out-of-work Americans. It offers an additional $600 a week through July in addition to typical state benefits and expands the pool of workers eligible for benefits. While the unemployment rate right now is elevated, federal policy “has acted very quickly ...

Is unemployment rate improving?

The unemployment rate is improving. It fell to 11.1% in June, down from 13.3% in May and 14.7% in April. The metric indicates that about 1 in 9 Americans in the labor force can’t find work. The unemployment rate isn’t as good a measure of hardship as it generally is due to additional financial relief many are receiving.

Why is unemployment not included in unemployment rate?

The unemployment rate doesn’t include the share of workers who may have dropped out of the workforce , perhaps due to feeling pessimistic about the chances of finding a job in the current economy. More than 6 million workers have dropped out of the labor force since February.

How much higher would the unemployment rate be if the unemployment rate was reported?

The overall unemployment rate would have been “about 3 percentage points higher than reported” if those individuals had been identified correctly, according to the agency. (The estimate isn’t seasonally adjusted.)

What does the BLS determine?

Arrows pointing outwards. The BLS determines how many people are unemployed based on a household survey. Survey interviewers misclassified several furloughed workers as being “absent from work due to ‘other reasons,’” according to the BLS. That’s the same category of workers who’d be on vacation, for example.

Why is unemployment low?

The Bureau of Labor Statistics, which published its monthly jobs report Friday morning, admitted the official unemployment rate may be low relative to reality due to an error in data collection.

What is U-6 in the labor force?

These are people who aren’t currently working or looking for work but are available for work, as well as part-time employees who want and are available for full-time work but have had to settle for part-time employment.

Does the U6 metric include furloughed workers?

The U-6 metric doesn’t include the workers misclassified by the agency. Of course, furloughed workers could be recalled back to work quickly, depending on the speed of the economic rebound as states begin to reopen certain business sectors.