About that low, low unemployment rate ...

Posted by Joshua Holland at 2:40 PM on February 2, 2006.

You hear a lot from Bush supporters about that low unemployment rate. Of course, it's a hinkey figure: it doesn't count those who have given up trying to find a job, or those who want a fulll-time job but can only get part-time work.

It looks like there may be some addditional, methodological problems with those unemployment data, as collected by the government's Current Population Survey (CPS). The CPS is one of the most important sources for data, not only on unemployment, but also on the poverty rate and the percentage of Americans with health-insurance.

A new report [PDF] by economists John Schmitt and Dean Baker at the Center for Economic Policy Research suggests that the CPS may be skewing the employment picture:

"Current labor market estimates appear to be overstating the share of working Americans by 1.4 percentage points. This corresponds to roughly 3 million fewer people working - almost as big a drop in employment as in a typical recession," said John Schmitt, CEPR economist and lead author of the report.

The study assessed employment rates among non-responders by comparing employment rates in the CPS with employment rates in the 2000 Census. In 2000, 8 percent of the population did not respond to the CPS. In contrast, only 2 percent did not respond to the 2000 Census. After adjusting for the errors in reported employment in the Census data (and excluding the prison population), the study found that employment rates were 1.4 percent lower overall in the Census than in the CPS.

The study also found that the CPS overstates employment rates for blacks by about 2 percentage points, with the gap for younger black men as high as 8 percentage points. The CPS also appears to be overstating employment rates of younger Hispanic women by about the same margin, and younger Hispanic men by 3 to 6 percentage points.

Since the CPS is also the source of official statistics on poverty rates and health-insurance coverage, the report warns that these widely reported numbers could also be overly optimistic. Non-working adults are more likely to be in poverty and less likely to be covered by health insurance. Therefore, if non-working adults are disproportionately excluded from the CPS, then the survey is understating the true poverty rate and overstating the share of the population covered by health insurance.

Joshua Holland is a staff writer at Alternet and a regular contributor to The Gadflyer.