Target 8: the Unemployment Rate

GRAND RAPIDS, Mich. (WOOD) - We wait eagerly for it. We scrutinize every decimal point. We hang on the monthly release of the latest Unemployment Rate. But it may not tell us all that's important to know about unemployment, either for our own good or that of public policy making.

Target 8 Investigators have found:

IT'S A POLL

The national unemployment rate and those of 11 states -- including Michigan -- are the result of a poll of some 16,000 households every month picked at random and questioned by employees of the US Census who go door to door. The data is massaged and published by the Bureau of Labor Statistics.

Why a survey instead of, say, just adding up everybody who is currently getting unemployment compensation? Well, unemployment compensation eventually runs out and people may still be jobless. Besides, the sharp-pencil people say the number of people questioned is a 100 times more than the average public opinion survey and that scientifically makes it really valid and reliable.

But why do only 11 states get their rate from the survey? That goes back to the sample size again. In states with a big population such as Michigan, there are enough people questioned to make the survey scientifically sound.

In the other states with too few people to make the numbers reliable, they use a handbook method of estimating the unemployment rate. It's the same way they calculate the local number which we will tell you about down page.

WHO'S IN, WHO'S OUT

The Unemployment Rate is all about definition. It counts people who are not working and who have looked for a job during the previous four weeks. That leaves out a significant number of others, such as people who need full time work but work part time to survive, plus what the economists call discouraged workers -- people who want to work but don't think there's a job available and quit looking.

If they were included in, say, January, the 7.6% unemployment rate would be 13.9%. Some economists think they should be included because many people would consider them unemployed and the scope of the problem would be better understood.

But the Bureau of Labor Statistics says adding them would mean redefining unemployment and make historical comparisons with previous years impossible. It would also make the meaning of the unemployment rate less clear because it would include people who are not totally unemployed. The Bureau points out that the census takers do include discouraged and part time workers in their survey, and that information is published along with the unemployment rate figures each month.

Still, the numbers get buried in table A11 of the Household Data. So nobody pays much attention. The media, politicians and most people pay attention mainly to the unemployment rate itself in any public discussions.

WHY YOU SHOULD STAY IN SCHOOL

In digging through the numbers with the help of labor expert George Erickcek of the WE Upjohn Insititute for Emplyment Research, we were fascinated by the unemployment rate analyzed by education level. People with a Bachelor's degree or higher have a 3.8% unemployment rate, while those with some college or an associate degree 6.2%. However, a high School diploma or no college has an 8% unemployment rate, and less than a high school diploma, 12%.

LOCAL RATE BY "COOKBOOK"

The unemployment rate for your city and county are the result of a formula involving some 64 different steps, according to labor analyst Erickcek. He calls it a "cookbook" method.

He thinks an actual survey, such as the one done on a national level, is better as it can be fairly accurate. But, again, size matters. In general, places with a bigger population have a better chance at statistical accuracy than places where there is going to be smaller sample of everything being looked at.

Another, more thorough measure is a door-to-door survey, but it's not monthly. It's the Census Bureau's American Community Survey done annually. Of that, Erickcek said, the three-year measure of unemployment may be the best. So while it may be more thorough it is also late.

WHAT DOES IT ALL MEAN?

Since there can be legitimate debate over just what the unemployment rate measures, Erickcek said, rather than scrutinizing the numbers to the decimal point, maybe we should just use it as a trend meter, one measure of our economic well-being.

If unemployment is up, that's bad. If it goes down, that's better.

And he likes to look at another measure. That's another number that gets published but not many people look at - the employment rate which shows how many working-age adults are actually working. That, he said, might be a better indicator.