Tuesday, August 25th, 2015
The Bureau of Labor Statistics will release its monthly unemployment numbers Sept. 4. There are many misconceptions about how this number is accumulated and reported and I would like to clear up the misperception before the report comes out.
The numbers are not an exact count of how many people are unemployed; the results come from the current population survey, which is conducted by the Census Bureau for the BLS.
Some people think the unemployment number is calculated from the unemployment insurance rolls, but it is actually done by survey.
For those of you who think the government is trying to make the numbers look better than they are, I hope you're sitting down for the next statement: The survey may actually be overcounting the unemployed people rather than undercounting them, which means the unemployment rate may be better than what the government posts.
If you disagree, I hope you will continue to read on.
Here are the numbers: Some 2.2 million people are receiving unemployment insurance benefits. However, the survey conducted via the current population survey estimates 8.3 million unemployed; this data comes from June 2015.
Surveys are conducted either face-to-face or by telephone to 60,000 households nationwide. These households must be eligible for employment in the civilian workforce.
Not included are members of the armed forces and people in prison, hospitals, mental institutions and nursing homes. These people are not capable of working in a civilian job and therefore are not part of the workforce.
If you total up the groups that I listed that are ineligible for a civilian job, that equals about 93.6 million people. We have roughly 148.7 million people employed from the total number older than 16 — 251 million people.
Doing the math, we have 101.9 million people not employed. If you deduct the 93.6 million people who are not eligible for civilian employment, that leaves 8.3 million people unemployed.
If you add the 148.7 million employed people to the 8.3 million people who are unemployed, that equals a total workforce of 157 million people. If you divide the unemployed people of 8.3 million by the workforce of 157 million, you get 5.286 percent, rounding it off to a 5.3 percent unemployment rate.
Here is where it gets really interesting and surprising how lenient the survey is in determining the unemployed. There is a manual that is used for the survey called "Current Population Survey Interview Manual."
An unemployed person is one who did not work or have a job during the reference week but was actively looking for work during the last four weeks and — very important — was available for work during the referenced week.
Now you may think of a person looking for a job going on interviews, sending out many resumes and doing a lot of hard work to find a job. At least that is my thought of someone actively looking for a job.
The population survey manual is far easier than what I would consider a job search. During the interview, the person is asked if they sent out just one resume or filled out one job application or even made one phone call to a recruiter.
So, how long would that take, five minutes? I wouldn’t want anyone to exert themselves too much.
What is amazing to me is asking a friend or a relative about a job lead also qualifies as a job search.
Furthermore, there is no documentation required. It's all done from the respondent’s memory and guess what? Experience has shown that the interviewee’s memory is usually very poor and they tend to exaggerate their job search commitment. What a surprise.
So now when you hear me talk about the employment number, you will have a better understanding of what makes up that number and maybe feel that things are little bit better than you thought.
Do you have a question or a company you'd like me to take a look at? Email me at Brent@WilseyAssetManagement.com!
Wilsey is president of Wilsey Asset Management and can be heard at 8 a.m. every Saturday on KFMB AM760. Information is provided by Reuters.
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