Over the past several days Gallup CEO Jim Clifton has attacked the U.S. Department of Labor’s estimate of the unemployment rate, calling it a “big lie.”  Later he amended his words using instead “misleading.”

 

There are two principal reasons as to why Clifton’s remarks are over the top.

 

First, anyone who has unpacked the BLS data knows that a global estimate such as the December 2014 jobless rate estimate of 5.6 percent, when it is disaggregated, displays large differences across demographic groups. For instance the latest BLS data indicates that the unemployment rate for married women, whose husband is present and who have at least one child under age 18, is 4.8 percent. For all other women -- never married, divorced, widowed, separated -- with one or more children under age 18 the jobless rate is 12.0 percent. For all other women with a child who is less than one year old the rate of unemployment is 19.0 percent.

 

Marriage and children matter. And that’s no lie.

 

Second, anyone who has read the monthly household survey published by the BLS knows that it supplies six estimates of labor underutilization. The BLS displays these estimates, which includes the official jobless rate for comparison purposes, in Table A-15.  Three of those estimates include the discouraged workers, two include discouraged workers and persons marginally attached to the labor force, and one includes the discouraged, the marginally attached, and those employed part time for economic reasons. The estimate identified as U-6 that adds persons who are discouraged, marginally attached, or working part time for economic reasons, in December 2014 was 11.2 percent.  In December 2013 it was 13.1 percent.

 

It’s not the Department of Labor that is lying or misleading. It’s misinformed reporters and politically-connected spin doctors.

 

There are three authentic problems with the household survey that Clifton might have addressed. First, the household survey is based entirely on telephone interviews in which the Census Bureau enumerator has no opportunity to observe the facial expressions and body language of the respondent and the general condition of the housing unit. Years ago, Census enumerators were dispatched directly to the housing unit to conduct the interview. They were trained to look for signs that indicate the respondent does not understand the question, is not telling the truth, or is irritated because he/she has to answer the same questions month after month as long as that housing unit remains in the sample.



Second, the household survey does not inquire about the immigration status of household members about whom the respondent may be lying with reference to their work activity in order to avoid detection by Immigration and Customs Enforcement agents.

 

Third, an estimated $2 trillion of earned income is not reported to the Internal Revenue Service. No doubt, some of that income takes the form of cash wages. Workers who are paid in cash may not report their work activity honestly to the Census enumerator in order to help hide the unreported income and evade taxes.
 

Clifton insists that we need “a bare minimum of 10 million new, good jobs to replenish America’s middle class.”  He does not tell us where that number comes from.
 

If 250,000 jobs were added every month (3 million per year), it would take more than three years to reach Clifton’s goal. Over the last fifteen years, there has not been a single year in which employers added 3 million jobs.
 

Clifton decries that only that 44 percent of persons 18 years of age and older in the population hold full-time jobs. The BLS annual estimate for 2014 shows that 50 percent of that population holds full-time jobs. The number climbs to 51 percent for persons 20 years and older and to 52 percent for those who are 25 years and older.
 

In the meantime we are left with several nagging questions. How does a steady job help a single mother in Detroit with a one-year old child who has dropped out of school, has little or no job skills, and no day care? How does a blue-collar job at a paper mill in Louisiana that requires a high school degree and pays $50,000 - $60,000 help a white-collar worker who lost his job in marketing research in St. Louis? How does a jobless worker in the coal mines of Kentucky qualify for a good-paying information technology job in Silicon Valley?


The December 2014 household survey indicates that there are an estimated 6,212,000 persons not in the labor force who want a job now. They include discouraged workers and those who are marginally attached to the labor force. The BLS does not tell us how many of them want a full-time job. Nor does it tell us where they live, their work experience, and if they are able and willing to be re-trained and relocated. The BLS does not tell us how to deal with the mismatch between jobless workers and job opportunities.
 

Clifton’s remarks call to mind Daniel Patrick Moynihan’s salty quip. “He’s entitled to his own opinion, but not his own facts.”

Edward J. O’Boyle is Senior Research Associate with Mayo Research Institute

www.mayoresearch.org

edoboyle737@gmail.com