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Unemployment's Down? Job Growth's Up?

Written By: Brenda (B.K.) Walker

Every major news station continues to toot the same rhetoric, "the unemployment rate is down and job growth is up." Really? How's that work when the number of homeless continues to increase, the same news stations continue to carry stories of how America needs to cut back on entitlement programs, and the government's still broke? How about all those businesses closing down? How does that play to the drop in unemployment and an increase in job growth?

The numbers just don't seem to measure up to what many of us are seeing with our own two eyes. This begs the question, where do the "powers-that-be" get their numbers? When the prominent authorities say, "Surveys suggest…," where do they get their numbers?

We've all heard the old adage, "the devil is in the details." Perhaps there are more answers in the details than we realize, a little something that the news media and the "powers-that-be" neglect to share with us common folk.

Calculating the Unemployment Rate the Government Way

It's painfully obvious that circumstances prevent the ability to know exactly how many people are unemployed at any given time. Not everyone is eligible for unemployment benefits, there is currently no process in place for individuals to register as unemployed if they aren't eligible for benefits or one to register if they are employed, and even if there were such a process, how could we be sure that every unemployed person is registered. Then there would also be the issue of maintaining the process to ensure that once someone gains employment, their name would be removed from the unemployment register and placed on the employed register.

So, in 1940, the government devised a survey, the Current Population Survey (CPS), to calculate the U.S. unemployment rate. The U.S. Census Bureau has been responsible for gathering this data, since 1942. Here's a quick overview of the process:

  • The sample survey contains approximately 60,000 eligible households
  • Equaling around 110,000 individuals surveyed per month
  • 800 of the 2,000 geographic areas are used for the sampling group
  • One quarter of the sampling households is changed out every month to ensure no one household is interviewed four consecutive times (in four months)
  • Once the household is removed from the cycle, it does not return to the interview process for eight months, meaning it will be interviewed again one year later, in the same calendar month
  • Once that household has been interviewed after the eight month waiting period, it is removed from the interview cycle process, for good
  • Leaving 75% of the survey group the same from month to month; and
  • Half are surveyed from one year to the next

The Bureau of Labor Statistics states, "This procedure strengthens the reliability of the estimates of month-to-month and year-to-year change in the data."

Well, considering there are approximately 155 million people counted in the civilian labor force, does this seem as though this manner of calculating the unemployment rate is giving us a clear view of the actual numbers?

Stay tuned, we'll be taking a deeper look at how the CPS is conducted. Food for thought, a wise man once told me,

"Survey questions can be asked in such a manner to garner the response you want, not necessarily the facts."

You'll find out just how true that statement really is when you read more about the CPS and how the survey affects the unemployment rate.


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