Measuring employment and unemployment
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The U.S. Bureau of Labor Statistics (BLS) collects and publishes information on employment and unemployment. Every month, they interview 60,000 households, asking whether individual household members have jobs or are looking for work.
Contents
Who is “Employed”?
If you live in a U.S. household, you may someday get a telephone call from a BLS interviewer. After a few preliminaries he or she will ask you the questions show in Box A of Figure 1. If you can answer “no” to all of these questions, you are part of the civilian, noninstitutionalized, aged 16 and over population about which this survey gathers data, and the interviewer will ask you questions about employment. If you answer any question in Box A "yes," the interviewer will not ask you about employment. Official employment and unemployment statistics do not include you.
If you are part of the surveyed population, you will then be asked the questions in Box B of Figure 1, starting with "Last week, did you do any work for pay or profit?" Anyone who answers “yes” will be classified as employed. If you did any paid work last week—even if you worked for only an hour or two at a casual job—the interviewer will code you as "employed." If you answer “no,” you will then be asked more questions. For example, if you have a paid job but just did not happen to put in any hours last week because you were sick, on vacation, or on certain kinds of leave, you will be coded as working and “employed.” Also, if you did unpaid work in a family-run business, such as a retail store or farm, you will be classified as “employed” as long as you worked in it more than 15 hours a week.
Note that the “family business” situation is the only case where unpaid work currently counts in the official statistics. If you work fewer hours in your family business, or are, for example, occupied with caring for your children or other family members or doing community volunteer work, you will not be considered to be “employed.” The BLS is currently seeking to improve its measures of people’s productive activities, both paid and unpaid, by instituting a new “time use” survey. This survey gathers data on how much time people spend in activities including paid work, unpaid work taking care of home and family, unpaid volunteer work, and leisure. In the meantime, however, it is important to note that—based on a convention that originated with the first employment statistics collected in the 1940’s—terms like “labor,” “work,” and “employment,” in official statistics generally refer to paid work only.
Measuring Unemployment
If your answers to the household survey do not result in you being classified as “employed,” you will be asked the questions about job search and availability shown in Box C of Figure 1. Activities such as contacting employers and sending out resumes count as “active” job search. Merely participating in a job training program or reading the want ads do not. The question about whether you could start a job probes to find out if, in fact, you are available for work. If, for example, you are a college student searching during April break for a summer job, but you aren’t available to start the job until June, you would answer “no” to the availability question. If you can answer “yes” to both these questions are you classified as unemployed.
If you are either employed or unemployed, the BLS classifies you as part of the labor force. But what if you are neither “employed” nor “unemployed”? Then you are classified as “not in the labor force." Often people in this category are taking care of a home and family, in school, disabled, or retired. People who are institutionalized, in the military, or under 16 are also not members of the labor force, as the labor force is defined by the BLS.
Notice, in Figure 1, that the vast majority of U.S. residents who are not “employed” are either “not in the labor force” (about 77.4 million) or are not part of the surveyed population (about 70.6 million). In comparison, about 7.0 million people in this month were formally counted as “unemployed.”
Every month, having made estimates of the number of employed and unemployed people in the country, the BLS calculates the official unemployment rate. This follows the formula:
For example, in May, 2006, looking at Figure 1 you can see that the BLS estimated that 144 million people were employed and 7.0 million people were unemployed. The unemployment rate was thus calculated as 4.6%:
The unemployment rate represents the fraction of the officially defined labor force which is made up of people not currently working at paid jobs, but who are currently looking for and available for paid work.
| Table 1: Unemployment for Different Groups (May, 2006) | |
|---|---|
| Group | Unemployment rate |
| All Workers | 4.6 |
| Race and ethnicity | |
| -- White | 4.1 |
| -- Black or African American | 8.9 |
| -- Hispanic or Latino Ethnicity | 5.0 |
| Age | |
| -- Teenage (age 16-19) | 14.0 |
| Education | |
| Less than a high school diploma | 6.9 |
| Bachelor’s degree and higher | 2.1 |
| Gender | |
| Adult Male | 4.2 |
| Adult Female | 4.1 |
|
Source: BLS News: May 2006 | |
The unemployment rate reported is the media is often “seasonally adjusted.” Over the course of a year, some swings in unemployment are pretty predictable. For example, agriculture and construction tend to employ fewer people in the cold winter months, and each year many students enter the labor force in June. The BLS releases “seasonally adjusted” figures that attempt to reflect only shifts in unemployment that are due to factors other than such seasonal patterns.
The BLS also estimates unemployment rates for various demographic groups, occupations, industries, and geographical areas. Historically, unemployment rates have generally been substantially higher for minority populations than for whites, for teenagers than for older people, and for less-educated people than for the more-educated. Unemployment rates often have differed somewhat by gender, though not with any consistent pattern. Some representative unemployment rates for May, 2006 are given in Table 1.
How People Enter and Exit Unemployment
Often, when we think of unemployed people, we think of someone who has lost their job—perhaps a friend or a relative who has been “downsized” from a position. Losing one’s job, however, is not the only way of becoming unemployed.
The BLS classifies unemployed people according to four main reasons for unemployment:
- Job losers left their last job involuntarily;
- Job leavers have voluntarily quit their jobs;
- Reentrants are people who were in the labor force at some previous time, and have now joined it again after some period away;
- Entrants are people who have just joined the labor force for the first time.
On average, about half of the unemployed are job losers, although the proportions of the unemployed in each group varies over time. During recessions, people are more likely to have been laid off and less likely to want to voluntarily leave a job (since they are not sure they will find another) than in times of greater prosperity. Sometimes when one family member loses a job, other family members will enter (or reenter) the labor force in order to try to make up for the lost wages.
How do people get out of being unemployed? Obviously, one way is by getting a job. However, people can also leave unemployment by leaving the labor force. They may stop actively looking for work because they have decided to go to school or take care of children. Other people leave unemployment when they enlist in the military, go to jail, or die—thus moving out of the surveyed population. Some of these life changes may reflect deliberate, positive decisions. But some unemployed people may simply give up actively searching for work because they have had no success after months of looking.
Discouraged Workers and Underemployment
The fact that some “not in the labor force” people might want jobs but have given up looking for them has troubled employment analysts for some time. To the extent people give up on looking, the official unemployment rate underestimates people’s need and desire for paid jobs.
In recent years, the BLS has added questions to the survey to try to determine how many people in the “not in the labor force” population may want employment, even if they are not currently searching for work. If someone says that they are available for work, want to work, and have looked for work recently even though they are not looking now, the BLS calls them "marginally attached workers." If they also say that the reason they are no longer looking is that they believe there are no jobs out there for them, they are called discouraged workers. They may have become discouraged because they believe their skills don’t match available openings, because they have experienced discrimination, or because they have been turned away time after time.
But let’s take a closer look at the people classified as “employed,” too. In the BLS statistics a person is counted as “employed” if they do any paid work at all during the reference week, even if only for an hour or two. Some people prefer part time work, of course, because of the time it leaves them for other activities like schooling or family care. Some are limited to part-time work for health reasons. But others want and need full-time work, and are only settling for part-time work until they can find something better. The household survey asks people who work part time about their reasons for doing so. In May 2006, 19.7 million people reported working less than 35 hours per week for reasons such as health or family responsibilities. In the same month, 4.1 million people reported working part time for what the BLS calls “economic reasons”—that is, slack business conditions or because part-time work was all they could find.
What indicator, then, should we look at to see if the national employment situation is “bad” or “good”? The BLS now actually publishes various measures of labor underutilization, that allow you to see the situation from a variety of different perspectives. For example, if you add in “marginally attached” workers and people who involuntarily work part time, the rate of labor underutilization in May, 2006 is 8.2%, as compared to the official unemployment rate of 4.6%.
The BLS also counts people as employed even if the kind of work they did does not begin to tap into their skills. Suppose you paint your aunt’s living room for cash while you are waiting to hear back on job applications for management or computer positions. The BLS counts you as already employed. People who are working at jobs that underutilize their abilities, as well as those that work fewer hours than they like, can be said to be underemployed.
If we are concerned about human well-being, underemployment as well as unemployment should be of concern. While underemployment due to an underutilization of skills is certainly of considerable concern or both efficiency and quality-of-life reasons, official surveys do not currently attempt to measure this sort of underemployment.
Further Reading
- Global Development And Environment Institute, Tufts University
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