The De Facto Unemployment Rate: 25.12%.

Ever since the early 1980s, residents of the Youngstown area have always been skeptical of government’s official unemployment rate. In 1982, the official unemployment rate hit 24.9% but declined to around 12% in early 1984. The Ohio governor and city officials praised the dramatic decline, but local residents knew that rate failed to account for workers who had given up looking for work, were working part-time, or had been forced into early retirement. In a report commission by the State of Ohio, the YSU Urban Studies program found that “real” unemployment rate was over 18 percent or about 1.5 times higher than the official rate.

Given the “shock” over the most recent unemployment numbers, it is worthwhile to take another look at the figures in light of Youngstown’s experience. But first we need some definitions of various categories of unemployed people, based on the Bureau of Labor Statistics and a comparative study done by the Center for Economic and Policy Research.  Attention class!

Officially unemployed– Persons who worked less than one hour during the nationally determined reference period (one week), looked for work during this period, and were available for work during this period.

Marginally attached workers – Persons not in the labor force who want and are available for work and who have looked for a job sometime in prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the four weeks preceding the survey.

Discouraged workers – Persons not is labor force who are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months)

Underemployed -Persons who would like to work full time but are not able to do so for economic reasons such as unavailability of full-time work or reduced demand for hours by current employer

Excess disability – Persons who are excluded from labor force because of sick leave or early retirement

Government programs – Persons receiving government subsidized or government provided programs. For example, low wage workers receiving Earned Income Tax Credits

Prison and jail populations – Persons not in labor force because of incarceration.

Now using these definitions and information for the current employment reports, we can begin to make estimates of the “de-facto” unemployment rate.

The official unemployment rate in December was 7.2%, an increase of .4% from the preceding month and a 2.4% increase since the National Bureau of Economic Research officially designated start of the recession in December of 2007. (These academic economists could not decide that we were in a recession until last month). To this we can add individuals who are marginally attached to the workforce (1.2%), discouraged (.4%), or who are underemployed (5.2%). The latter figure is of particular concern as some companies reduce workers’ hours in order to avoid layoffs. This was borne out in the current employment report where the average hours worked declined to 33.3 hours.  The next step for struggling employers will be layoffs. Anyway, if you’re keeping track, our de-facto unemployment rate is up to 14%.

From here it gets statistically more difficult. But using the approach taken in the Center for Economic and Policy Research study, we can estimate that 6% of the potential labor force consists of people who have been forced to retire or are on sick leave, and those whose work is being subsidized by the Federal Government is at 4%. Both of these are conservative figures given the high levels of plant and office closings and buyouts in the past year.  Together, they add another 10% to the de-facto unemployment rate

Finally, prison reform advocates have long suggested that incarceration levels are a direct response to economic conditions. This is especially important in a country that has such high rates of incarceration; according to a 2003 British study, the US has the highest incarceration rate in the world.  If we count incarcerated people among the unemployed, that adds another 1.48% to our de-facto unemployment rate for a total of 25.12%

		12/08
Unemployed		11,1087.2%
MarginallyAttached		1.908(1.2%)
Discouraged		642(.04%)
Underemployed		8038(5.2%)
Excess disability*		Est.(6.0%)
Government Programs*		Est.(4.0%)
Subtotal		23.64%
Prison Population		2.300(1.48%)
Total		25.12%

So what does all this mean? It is what “Main Street” not “Wall Street” has been saying for a long time. The economy is bad, real bad, and it’s getting worse for working families. It is particularly difficult for those who have given up looking for work because they have been left behind by economic change and technology, working-class people whose only hope for the future is in jobs with short job ladders and poor pay. Not only have they been forgotten, but they have erased from official unemployment reports.

To make matters worse, over the last 20 years, business and economic reporters and/or commentators have been, at best, Pollyannaish and at worse flaks and con men when comes about talking about the real situation for working- and middle-class Americans. The media has only recently begun to reassess the economic situation as journalists and pundits have tried to make sense of the mortgage crisis, financial failures and scandals, widespread layoffs and the growing economic crisis.

We count on policy makers and the press to provide accurate information to help us understand and address the economic crisis.  The more we know, the better prepared we can be, as individuals and as a society, to respond effectively.  This is especially true in light of the recent debate over whether we are in a recession (mild or severe) or on the brink of regional and/or a national economic depression.

Youngstown’s unemployment rate still among the highest in the nation after 25 years, and now the whole country has begun to know what Youngstown has known for a long time.

John Russo