Who does the government count as 'employed'?

John W. Schoen Senior Producer • Profile • E-mail

The latest government report on employment can be counted on to raise questions with Answer Desk readers about just who is officially considered employed and who isn't. Mary in Kansas City is wondering if people whose unemployment benefits run out are counted. And Tony in New Jersey is wondering where military workers fit in.

Is the figure used for total unemployment derived from the various states' statistics regarding the number of people who are receiving unemployment compensation? If so, is there an adjustment to that figure to include people who have been unemployed so long that their unemployment benefits have run out?
-- Mary, Kansas City, Mo.

The data are not collected from unemployment claims. The Labor Department conducts two separate surveys — one in which they call workers directly and the other in which they collect information from employers on employment, hours and earnings. That sample includes about 160,000 businesses and government agencies at 400,000 separate workplaces.

So while you may quibble with the government’s data definitions, it’s pretty clear how they go about collecting the numbers. And while they have recently become the subject of much political spin, the numbers aren’t supposed to be a straw poll on the success of the government’s economic policies. They’re intended for use by economists, analysts and forecasters to track changes in labor status over time.

That’s why the numbers are also “seasonally adjusted” to take into account annual events that don’t reflect long-term job gains or losses. Without these adjustments, for example, the unemployment rate for the retail industry would go down in November as temporary workers are hired for the holidays and then jump up in January when those temporary jobs end. Adjusting the numbers gives you a better read on longer-term industry trends.

While the monthly report may not best describe what you or I would call “unemployment,” it's one of the best sets of data available to track changes in the economy. That’s because the size of the sample is large enough to pick up broad changes in hiring patterns. And because the numbers are available on the first Friday of the month, they’re the “freshest” of the major economic reports available.

If you wanted to, you could certainly define unemployment differently. A lot depends on who you choose to include (or exclude) from the labor force you’re using as a base. Should students be in or out? How about retirees working part-time but not currently employed? Furloughed auto workers? Illegal immigrants? In the end, the reason for including or excluding various categories of workers has more to do with improving the sensitivity of the survey as an economic barometer than it does with adhering to a definition of employment that you or I might find more accurate.

The “household” survey, for example, asks if someone is “actively” looking for work, and if the answer is that they've given up looking, they're excluded from the count of the total labor force. In a sense, they're invisible. You can argue — as many readers have — that these people should be counted as “unemployed.”  Since all this data is available, you can include these “discouraged workers” in your definition of unemployment, and many economists and analysts do so.

As for the quality of jobs created, it’s not entirely clear that high-paying jobs are being replaced by low-paying jobs. Overall, wages are rising. What does seem clear is that the gap between the lowest- and highest-paid continues to widen.

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