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Unemployment data flawed, but there's no easy fix, ex-BLS chief says

By   /   October 9, 2012  /   1 Comment

By Kirsten Adshead | Wisconsin Reporter

MADISON — The U.S. Bureau of Labor Statistics’ method of calculating unemployment is a “flawed measure” that contains “real problems,” the agency’s former commissioner, Keith Hall, says.

“That doesn’t mean, though, that there’s an easy way to fix it,” Hall told Wisconsin Reporter on Tuesday.

FUZZY NUMBERS: The monthly unemployment data is an imperfect tool, the former commissioner of the U.S. Bureau of Labor Statistics said Tuesday. But. Keith Hall says, the perfect tool doesn’t exist.

The release of BLS data indicating the percentage of Americans seeking work, but unable to find employment, sparks a political debate each month, with incumbents jockeying for credit for any employment growth and challengers trying to pin unemployment hikes on whomever is in office.

American voters routinely rate jobs and the economy as the issue that is most important.

Plus, as William Hixon, chair of Lawrence University’s government department, noted, the unemployment rate is “easy to communicate and reflects something that a lot of people would be concerned about.”

The proximity of the November elections — now just four weeks out — put extra attention on the September report, which the BLS released last week.

The report indicated that unemployment dropped to 7.8 percent — still high but, nevertheless, the lowest level it’s been since January 2009, the month President Barack Obama took office.

Wisconsin-specific unemployment data typically is released a few weeks after the BLS data. For August, unemployment in Wisconsin rose to 7.5 percent, up from 7.3 percent in July, according to the Wisconsin Department of Workforce Development.

Politically, Friday’s report was big news for the Democratic and Republican nominees for president:

  • For Mitt Romney, it robbed his campaign of a key point he repeatedly has cited as evidence of Obama’s failed economic policies: That unemployment had not dropped below 8 percent during Obama’s tenure in office.
  • For Obama, it was a much-needed bit of good news after pundits and the public alike declared Romney the winner of the first presidential debate.

Romney — and several conservatives — responded to Friday’s report by attacking the numbers.

“If not for all the people who have simply dropped out of the labor force, the real unemployment rate would be closer to 11 (percent),” the former Massachusetts governor said in a statement. “The results of President Obama’s failed policies are staggering — 23 million Americans struggling to work, nearly one in six living in poverty and 47 million people dependent on food stamps to feed themselves and their families.”

Former General Electric Chief Executive Jack Welch even accused the Obama camp of manipulating the data, tweeting: “Unbelievable jobs numbers .. these Chicago guys will do anything .. can’t debate so change numbers.”

Hall, now a senior research fellow at George Mason University, doesn’t buy the conspiracy theory.

Appointed by former President George W. Bush, Hall served as commissioner for much of Obama’s term in office.

But Hall said he understands, even agrees with, some criticism of BLS unemployment data.

Among his concerns:

  • The unemployment rate is “artificially low” because only people who are actively seeking employment are counted as “unemployed.” People who got frustrated and stopped looking for work aren’t technically “unemployed,” according to the data.
  • The rate does a poor job measuring “underemployment,” those people who are working but not at the level or to the extent they should be, based on their education and experience. “If you worked one hour (in a given month), and got paid at all, you’re employed,” according to BLS data, Hall said.
  • The payroll survey, conducted by interviewing businesses and government agencies, gives a good, broad overview, but not a lot of information. The household survey gets a lot of information from households about their earnings, hours of work, demographics, etc. But Hall said the sample size probably needs to be larger for the statistics to be more accurate.

“And that’s the one that probably should be larger than it is,” he said. “It’s a cost thing.”

The problem Hall sees is that, as flawed as the unemployment rating is, its would-be replacements have their own problems.

People could, for instance, look at the employment-population ratio, which measures the percentage of working-age, noninstitutionalized people who are actually working.

In September, it was up 0.4 percent, to 58.7 percent, according to BLS.

It’s a measurement that “has to move” in order for the economy to improve, Hall said. And it’s a number that has stayed pretty flat all year.

Still, he noted, that measurement doesn’t consider the effects of an aging population. As the baby boomers move into retirement, they’re still included in the working-age population, but they won’t be working, so the employment-population ratio, as a result, goes down.

The next BLS report, this one on the October unemployment numbers, is due out Nov. 2, four days before Election Day.

Hall’s advice?

“There’s no one best single indicator that tells you about the health of the labor market,” he said. “You have to look at a number of things.”

Contact Kirsten Adshead at [email protected]


  • Edward Perkins

    I find it very hard to believe that educated people like the writers of this article and Keith Hall are not recognizing that they are redefining a NEW norm for what is acceptable unemployment. To say that “Mitt Romney has been robbed of a key point validating his criticism of Obama’s failed economic policies because of the claimed 7.8% unemployment rate” totally overlooks the fact that 4 years ago the acceptable unemployment rate was around 4%. Now we are accept an unemployment rate DOUBLE what we were told was acceptable 4 years ago! Also, we must understand that many people are working part time today which wasn’t the case 4 years ago and we must understand many people are no longer looking for work. Yet we are to believe that great improvement has all at once happened with a 7.8% unemployment number. WOW!