Unemployment numbers probably not telling full story

BOULDER ? Mike Pettigrew was laid off in September 2001. His unemployment insurance extension ran out in June 2002. Since then he’s cashed in his 401(k) and is living off that. He’s also had odd part-time programming jobs and done plenty of volunteer work.

A program manager with more than 20 years software development experience at notable companies like TRW, Compaq, Digital Equipment Corp. and Storage Technology Corp., Pettigrew said he hasn’t entirely given up looking, but has ?no prospects.?

This sad tale might lead one to assume that Pettigrew is among the unemployed. But given the way unemployment numbers are crunched, statistically he’s not in the labor force.

The U.S. Department of Labor Bureau of Labor Statistics (BLS) determines unemployment statistics using three major sources: unemployment insurance claimants, Current Employment Statistics (CES) and Current Population Survey (CPS).

The CES is a monthly survey conducted nationally by the Census Bureau that examines labor force activities. The CPS is a monthly survey done at the state level that provides employment, hours and earnings estimates.

?You’ve got to be careful when you use a statistic because it may or may not tell you what’s going on in the economy,? said Gary Horvath, marketing analyst with the University of Colorado’s Leeds School of Business in Boulder.

Colorado’s unemployment rate has come down slowly to 5.2 percent in October from a high of 5.7 percent in February. Although the numbers say unemployment is going down, Horvath is skeptical about what the numbers mean.

?It doesn’t measure a number of things,? Horvath said. ?What we’ve seen in other downturns is that the number of companies increases because when people get laid off they start their own companies. There may be people working as consultants or working in their garage, and we may not see the impact of those new businesses until two to three years down the road.?

Garage-based entrepreneurs may or may not be counted in the workforce, said Leeds School of Business Professor Richard Wobbekind. An independent consultant who doesn’t report wages and salaries of employees won’t register on the CES survey as employed, he said. When that individual files quarterly estimated income tax, however, he or she will be considered employed according to the CPS.

Horvath thinks the unemployment rate may be off because recent job losses have been among people with high-end salaries. Many of the people who use to make $60,000 or $70,000 per year own homes with equity in them, he said. This means they refinance and ?live off that for a year or two,? he said.

Wobbekind isn’t as concerned about the truth of unemployment statistics as he is about underemployment. Someone with a master’s degree in history who’s doing technical writing is just as underemployed as an engineer working at Starbucks, he said. Self-employed consultants are underemployed as well since they probably work fewer hours at less of an hourly rate than they’d like.

Underemployment skews the overall economic picture more than unemployment statistics, Wobbekind said. ?When (the unemployment rate) goes from 3 percent to 5 percent, it’s not just those 2 percent of people who are now unemployed. All that translates into less spending power.?How Census Bureau surveys for jobless workersEvery month the Census Bureau takes a mini-census known as the Current Population Survey (CPS) that looks at, among other things, labor force activities. According to the Census Bureau:

* People with jobs are employed.

* People who are jobless, looking for jobs and available for work are unemployed.

* People who are neither employed nor unemployed are not in the labor force.

In order to be classified as unemployed one must have actively looked for work in the prior four weeks and be currently available for work. Actively looking for work could mean:

* Having a job interview.

* Contacting an employer, a public or private employment agency, friends or relatives, a school or university employment center.

* Sending out resumes or filling out applications.

* Placing or answering advertisements.

* Checking union or professional registers.For more information: www.bls.census.gov/cps/cpsmain.htm.

Contact Caron Schwartz Ellis at (303) 440-4950 or e-mail csellis@bcbr.com.

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