Jobs Report: Donald Trump Joins Economic Experts Who Say The Official Unemployment Rate Is Inaccurate

When Donald Trump on Monday questioned the accuracy of the federal government’s glowing employment reports, it may have seemed like another unsubstantiated outburst from a famously loose-with-the-facts candidate. But in this case, he was joining a bipartisan chorus of businesspeople, economists and lawmakers who say the monthly employment report is an artificial portrait deliberately airbrushed by statisticians to make the jobs picture look better than it really is.

Last week, the Obama administration’s Bureau of Labor Statistics reported that the economy added 255,000 jobs in July, and that the official unemployment rate had remained at 4.9 percent — the lowest it has been since early 2008. In a speech to the Detroit Economic Club, Trump derided the report, calling it “one of the biggest hoaxes in modern politics.”

Though Trump didn’t say so, the larger criticism of the unemployment rate revolves around how it counts — and doesn’t count — the jobless. Today, the official unemployment rate counts only those actively seeking a job. It doesn’t count those who have dropped out of the official labor force either because they have not been able to find a job, or because they are working part-time and cannot find full-time employment.

“In today’s labor market, the unemployment rate drastically understates the weakness of job opportunities,” wrote the left-leaning Economic Policy Institute on its website, which calls for a more comprehensive unemployment rate. “This is due to the existence of a large pool of ‘missing workers’ — potential workers who, because of weak job opportunities, are neither employed nor actively seeking a job. In other words, these are people who would be either working or looking for work if job opportunities were significantly stronger. Because jobless workers are only counted as unemployed if they are actively seeking work, these ‘missing workers’ are not reflected in the unemployment rate.”

The group argues that there are now 2.3 million “missing workers” — a number that, if counted by BLS, would bump the official unemployment rate up to 6.2 percent.

Others such as private equity executive Leo Hindery argue that even that figure grossly understates unemployment in America. A longtime Democratic Party economic adviser and fundraiser, Hindery has since 2006 published a monthly email to lawmakers, congressional staff and activists that compiles data from BLS and the Census Bureau and then adjusts to arrive at what he says is a more accurate view of the unemployment situation.

In his latest dispatch, Hindery points out that there are 2 million so-called “marginally attached workers,” which BLS defines as those who “were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months.” There were also another 5.9 million “part time of necessity” workers — those he says are “unable to find full-time jobs or who’ve had their hours cut back.” If those workers were counted, official unemployment rate would be 9.7 percent, as BLS itself acknowledges. Add another 4.3 million who say they want work but haven’t sought employment, and Hindery says the real unemployment rate in America is 12.1 percent.

That figure, he says, tracks a relatively recent trend in which there are as many uncounted unemployed or underemployed workers as those counted in the official unemployment figure.

“The difference between the real and official unemployment rate had for years after the second World War never been more than about 30 percent, even in recessions,” he told International Business Times-. “So if your official unemployment rate was 5 percent, in real terms it might be, say, 7 percent, which isn’t great, but won’t kill your economy. What happened in the two-year lead up to the 2007 recession, though, is that for the first time the ratio went to 1-to-1 — so if your unemployment rate was 7 to 8 percent, it was really 14 to 16 percent. And that’s a huge change.”

“They Made A Pact With Themselves And With The Devil”

Trump’s criticism of the latest job report quickly politicized employment statistics, but that's nothing new. Hindery, for instance, asserted that the current method of counting the jobless was a political decision made by both political parties right after World War II.

“Both parties sat down and basically said if we ever tell the American people the truth about the employment rate, things could get ugly for whichever one of us is in power,” he said. “So they made a pact between themselves and with the devil to not count everyone.”

In more recent times, the tabulation of employment statistics has changed — and has been a source of political controversy.

In 1994, for instance, federal officials revised the way it counted “discouraged” workers — those who want to work but have given up looking. In a research paper about the change, one BLS official noted that “The number of discouraged workers was much smaller after the 1994 redesign because the definition for the group was tightened.”

In late 2002 — amid a recession — President George W. Bush’s administration discontinued the Labor Department’s mass layoff report, prompting Democrats to accuse the White House of suppressing negative economic news. Democrats managed to restore the regular report for a decade, but it was eliminated again in 2013 by the Obama administration as part of a budget-cutting sequestration agreement with congressional Republicans. With President Obama championing the controversial Trans-Pacific Partnership, the budget deal also followed through on the Obama administration’s previous proposal to cut a BLS unit that helped track the job-loss effects of trade deals.

Two years after that agreement, 19 House Republicans co-sponsored legislation called the “Real Unemployment Calculation Act” that would mandate the federal government include more jobless workers in its official unemployment rate. In doing so, it would address what Gallup CEO Jim Clifton has said is the big problem with the current rate.

“There's no other way to say this,” he wrote. “The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie.”