Callaghan: ‘Real’ unemployment rate used for political arguments




It’s sometimes called the “real” unemployment rate and it’s always the number preferred by out-of-power politicians who use it as proof that the economy isn’t as good as the incumbent president or governor says it is.

In bureaucratese, it is the U6 column in the federal Bureau of Labor Statistics’ “Alternative Measures of Labor Underutilization for States,” and it includes more people than the number commonly reported as the official unemployment rate. That is the one that reports the percentage of residents who say they looked for work but couldn’t find it. It doesn’t include so-called discouraged workers — those who looked for work within the last year but made no attempts in the previous four weeks. Nor does it include those considered “marginally attached to the work force” or those who settled for part-time jobs.

The U6 measure gathers in all of these groups and, as such, is higher than the official number. For example, the official rate for April in Washington state was 7 percent. But the U6 number for Washington in the first quarter of 2013 was 16.4 percent.

During their news conference Monday, leaders of the state Senate’s Majority Coalition Caucus cited that number to argue that the state’s economic recovery remains fragile. In the Bureau of Labor Statistics’ “broadest definition,” said Senate Commerce and Labor Committee Chairwoman Janea Holmquist Newbry, R-Moses Lake, “we ranked 5th highest in unemployment. So again, this is a sign that our state has a lot of room for improvement in regards to our business-friendly outlook for our employers.”

Majority Coalition Caucus Leader Rodney Tom, D-Medina, used U6 to make the case that the 2013-15 budget should be balanced without new revenue “so we can create jobs and not inhibit them.”

Part-time anomaly

Few argue that Washington state’s recovery is robust. While economic indicators, including unemployment, are getting better, the state still faces what economists call “headwinds.” Last week’s economic and revenue update from the Office of the Forecast Council noted that while the council had predicted earlier this year that employment would grow by 4,500 jobs in April, the state actually lost 1,400. While worrisome, the update reminded policymakers that monthly numbers can be quite volatile.

Still, most labor economists might be surprised to hear that the state has the nation’s fifth highest unemployment rate. All of the other measures put Washington at roughly the same place relative to other states — between 15th and 21st. Only when those part-timers are included does Washington break into the top five. And that is unusual. “… states that have high unemployment rates tend to have high values for the other five measures,” the latest federal report states. “The reverse is true for states with low unemployment rates.” North Dakota, for example, has the lowest rates for all six measures, Nevada the highest.

So what is it about Washington and part-time workers? State labor economists have guesses but say they’d never studied it. Perhaps it is the effect of the high-tech industry with its use of temporary, contract and part-time workers. Maybe Washington’s shared-work program is more generous than other states. That is the program through which employees who have their hours cut can get some money from unemployment compensation.

Whatever the reason, Washington’s high placement in the U6 category but not the others suggests U6 might not be the best measurement to show how the state compares. “It’s not something the economics community tends to attach a lot of significance to,” said Paul Turek, the state’s regional labor economist, based in Tacoma. More often it is cited by those who want to make the case that things are not as good as others are claiming.

Turek thinks there are plenty of other statistics that could be cited to make the case that the economy is still fragile. “You could probably make the same case by using numbers that are less esoteric,” Turek said.