Here are some basic facts about how the unemployment rate is calculated.
The labor force consists of all people working (including self-employed), plus unemployed.
“Unemployed” means out of work AND actively seeking work.
Each month canvasers spread out and knock on 50,000 American doors and ask a bunch of questions. They chose a cross-section of cities and neighborhoods, and return a few times if no one answers.
Among the many questions are buried the following:
How many in this houshold?
Who is working? (defined as working as little as one day per week, last I checked)
Who is not working but wants to?
Is that person actively seeking work…i.e. making applications, asking friends about leads, checking want ads & following through, etc., etc. If so, bingo, they are classified as unemployed.
The current work force is about 153 million, of which about ten and one-quarter million are unemployed. 6.7%
Given these definitions, many people are not working by choice–stay-at-home Moms (& Dads), full time students, institutionalized, retired, etc.
A couple more definitions:
Underemployed generally means those working way under their potential, such as part-timers who would rather work full time. Also includes those working way below what their education and experience would suggest, such as Political Science majors flipping hamburgers (though I would
suggest they have maxed out).
Discouraged Workers is a category of people who have supposedly given up looking for work, but would take it if offered. Given the series of questions posed above, one can imagine a lot of people in this category, but that is a subjective call.
Journalists and hand-wringers like to point to an army of underemployed and discouraged workers as the government’s way to understate our problems. The government does put out estimates of these categories, but rightly sticks to objective questions when doing these surveys so the statistics have meaning over time. They tweak their survey methods to try to keep them relevant and meaningful. They are constantly challenged by suspicious critics so have to prove their validity constantly. Overall, a pretty good system.
