Well,here we go again. Henwood, preferring to attack anyone who dares challenge the veracity of government statistics, and whoever might suggest that maybe, just maybe, the labor department’s methodologies have been lagging the dramatic changes that have been impacting the labor markets in recent years, has challenged my recent post on jobs…again. Rather than challenge his good buddies in the government bureaucracies, he prefers to play attack dog against those who do.
Let’s take a look at what he’s saying, and how he cherry picks and distorts my points.
First, how about the labor force participation rate, that’s his main topic. At the beginning of 2000 it was 67.3. It hit a low at 62.4 four years ago. That’s 4.9 percentage points. Or roughly five percent of the 164 million US labor force. Today, four years later it’s only 63.2 or 4.1 points. That’s still 6.7 million potential entrants to the labor force who aren’t in it. Presumably they’re adults and supporting themselves some way. Why then aren’t they in the labor force numbers. Better ask the bureau of labor statistics buddies of Doug, but they have no answer. Their explanation for the falling participation is that more workers are taking longer maternity leave or more of them are in jail. I don’t buy any of that. Nor do I buy other economists’ arguments that it has to do with decline of job training by companies. More likely, the BLS is simply not picking up the status of those not officially in the labor force because their methodologies for data collecting are deficient. The BLS doesn’t know where these workers are, just as they have no accurate picture of the undocumented and underground economy employment/unemployment.
More importantly, the falling participation rate reduces the labor force and thus understate unemployment. I believe I said in my article (not quoted by Doug) that it means more than 5 million are thus not counted. Doug can quibble about whether it’s 2015 or 2007 or 2000, but the point is there’s a dramatic decline in the participation rate and the BLS refuses to adjust its employment numbers to reflect it. Result: unemployment is under-stated.
My point about undocumented and underground workers is of course many are working but it is highly likely more are not working and the vast majority are working part time and temp jobs. That’s a net negative for the U-6 unemployment rate. Again, because the CPS conducts a phone survey that doesn’t pick up these groups (who don’t answer I’m sure), it under-estimates the net underemployment/unemployment of these groups.
What Doug refuses to address is how I estimate the real unemployment rate is likely 10%-12%. He just says it’s not accurate. I guess he thinks the ‘discouraged’ worker, ‘missing labor force’ worker, and ‘involuntary part time worker’ numbers offered by the BLS are accurate. I don’t. And I suppose he doesn’t believe that the million more who went on the SSDI roles after 2009 should not be counted as unemployed either.
Really Doug, you should stop trying to call people names and acknowledge that maybe the government is not always telling the facts. It’s not that they are outright lying. It’s just that the labor markets are changing faster than their methodologies can keep up and that they’re bureaucratically conservative. Or even purposely obfuscating, as in their latest report on the number of Gig workers, where they excluded Uber drivers as well as anyone for whom gig work was not their primary job.
Dr. Jack Rasmus @drjackrasmus
Jack Rasmus 
I have thought about this. I regularly go to njfac.org, and take their figures. But then I also do this: The Social Security Administration publishes a wage income report. The latest is for 2017 and the next comes out in mid October. Here’s 2017: https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2017 — It shows 165,438,239 workers in 2017. While the BLS shows a labor force of 160,320,000 with average employment of 153,337,000 working. (I took that from https://www.bls.gov/web/empsit/cpseea01.htm) Now let’s agree that the SSA is correct, 165mn worked, and usually 153mn were at work, it indicates that 12 million were not working on average, that’s a U3 of 7.3%. Now I will go to National Jobs for All Coalition and add on the involuntary part-timers, 4.4 million in August, 2019 (and it was higher in 2017, but I don’t want to look it up). Therefore the U6 will be around 12mn plus 4.4 mn, or 16.4 mn, or about 10%. I agree that the BLS is much understated, and my method incorporates the SSA data, and is not dependent on phone surveys. Also, it must be stated, the SSA data shows that the collective income of the lower-earning half, or 82 million workers, is just over $1.1 trillion. The national income, which I take from the Joint Committee on Taxation (Overview, 2017), was about $14.4 trillion. So, the lower half earned in wages less than 8% of all income. Who received the other 92%? This is pre-tax income. The “State of Working America” has a table on the sources and distribution of income, Table 2.4, Income. It showed that the lower-earning 80% took in wages about 28% of all income. It was difficult to figure that out, but my memory serves me pretty well. See here: http://www.stateofworkingamerica.org/index.html%3Fp=29591.html —
You can check, the lower 80% earned 50.2% of all wages, and wages were 54.3% of all income, therefore their wage income was 27.3% of all income. And this is post-transfer assessment, so the social security is taken out and transferred. Complicated. The end take away: low income workers make very little relative to total income, and the unemployment numbers don’t accurately show the huge number who are marginally employed, yet still submitting W-2 forms to SSA. My first blog (http://benL8.blogspot.com) has a graph showing that income for the lower-earning 90% held steady around 55% from 1940 to 1980, and since then has dropped to 38%, a drop of 17%, which comes out to about $23,000 per household in the lower-earning 90% of households. My current blog: http://benL88.blogspot.com, and the first one: http://benL8.blogspot.com where the graph is easily located. It comes from data by Saez and Piketty. Hope this helps. It’s a messy comment/answer. Is it really important that the BLS U3 is wrong? Definitely. And is it important to know how little the lower-earning half or 80% or 90% are earning. Yes, it’s a huge inequality that is disabling the economy and people’s lives.
This is such an excellent investigation and analysis, Ben. I really hope everyone on this blog reads it. The social security data clearly challenges the BLS. (Just as, by the way, UC Berkeley prof, Emmanual Saez, back in used the social security data to show how much the wealthiest 1% were getting the lion’s share of new income. The Commerce Dept. up to that time was purposely hiding the concentration of income to the top 1% by only reporting 20th percentiles for income and wealth gains. I’m going to post your commentary, if you don’t mind, on the main part of my blog. I hope that Doug Henwood bothers to read it and stops apologizing for the BLS data and his buddies there. Great work, Ben.
[…] A) Here We Go Again…Debating Henwood on Official US Govt. Job Stats; and B) Benl8 Weighs In: Refuting Henwood on Labor Force Participation and the Missing Millions […]