Gallup’s CEO Calls the Official U.S. Unemployment Rate a “Big Lie”

American consumersI’ve blogged before about how the American public doesn’t seem to be responding to the news that the country has been out of its economic recession for a number of years now.

It’s not for lack of trying.  From the White House and other politicians to government agencies, financial industry practitioners and news media articles, there’s been a steady stream of speeches, announcements, news items and commentary lamenting the disconnect between the perception and the reality.

Plus … I’m reminded often by my business counterparts who work in Europe and Asia that the situation is much better in America than in many other countries.  I consider it advice to “count our blessings,” as it were.

With this as backdrop, it’s easy to fall into the paradigm of thinking that the American public is simply being unrealistic in its expectations for economic recovery — and the recovery’s ability to reach into all strata of society.

But then … along comes a commentary by Jim Clifton, chairman and CEO of the Gallup polling organization.

Jim Clifton Gallup CEO
Jim Clifton

In addition to heading what is arguably America’s most famous polling company, Mr. Clifton is a keen observer of economics and public policy.  He is also the author of the book The Coming Jobs War (published in 2011).

The gist of Clifton’s commentary is that the official unemployment rate, as reported by the U.S. Department of Labor, is very misleading.

Moreover, it’s Clifton’s contention that the very way the Department of Labor calculates the unemployment rate goes straight to the heart of the disconnect between the experts and the “person on the street.”

Here’s what Clifton wrote in a column released earlier this month:

“If a family member or anyone is unemployed and has subsequently given up on finding a job — if you are so hopelessly out of work that you’ve stopped looking [for work] over the past four weeks — the Department of Labor doesn’t count you as unemployed. 

That’s right:  While you are as unemployed as one could possibly be, and tragically may never find work again, you are not counted in the [unemployment] figure we see relentlessly in the news — currently 5.6%.”  

official U.S. unemployment rate
The official U.S. unemployment rate as reported by the United States Department of Labor’s Bureau of Labor Statistics.

In Clifton’s estimation, right now as many as 30 million Americas are either out of work or severely unemployed.  That would equate to an unemployment rate far higher than the reputed 5.6% figure.

But it goes even beyond that.  Clifton points out another clue as to why the perception gulf between the “statisticians” and the “street” seems so wide — and he puts it in the form of two examples:

“Say you’re an out-of-work engineer or healthcare worker or construction worker or retail manager.  If you perform a minimum of one hour of work in a week and are paid at least $20 — maybe someone pays you to mow their lawn — you’re not officially counted as unemployed in the much-reported 5.6% [figure]  

Few Americans know this. 

Yet another figure of importance that doesn’t get much press:  those working part time but wanting full-time work.  If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find — in other words, you are severely unemployed — the government doesn’t count you in the 5.6%.   

Few Americans know this.”

Clifton doesn’t mince words in his characterization of the official unemployment rate; he calls it a “Big Lie” — one which has consequences that go well-beyond simply the stats being arguably wrong.

Here’s how he puts it:

“… It’s a lie that has consequences because the Great American Dream is to have a good job — and in recent years, America has failed to deliver that dream more than it has in any other time in recent memory.   

A good job is an individual’s primary identity — their very self-worth, their dignity.  It establishes the relationship they have with their friends, community and country.  When we fail to deliver a good job that fits a citizen’s talents, training and experience, we are failing the American Dream.”

Statisticians and economic policy experts can and do disagree about what constitutes a “good job” in America.  The Gallup organization defines it as working 30 or more hours per week for an organization that provides a regular paycheck, with or without other benefits.

That’s actually a pretty low-bar for what defines a “good job.”  But however jobs are defined, the U.S. economy is currently delivering at a rate of just 44%, which equates to the number of full-time jobs as a percent of the adult population (age 18 and over).

It would seem that the 44% figure would need to be significantly higher to really solve the challenge of available jobs.

Clifton concludes his commentary by issuing this challenge:

“I hear all the time that ‘unemployment is greatly reduced, but the people aren’t feeling it.’  When the media, talking heads, the White House and Wall Street start reporting the truth — the percent of Americans in good jobs; jobs that are full time and real — then we will quit wondering why Americans aren’t ‘feeling’ something that doesn’t remotely reflect the reality in their lives. 

And we will quit wondering what hollowed out the middle class.”

I’ve devoted significant space in this blog post to quoting Jim Clifton’s words verbatim, so as not to change their tenor or dilute them in any way.

What do you think?  Is Clifton speaking truth to power?  Or is he painting an overly negative view of things?  I welcome your thoughts and comments.

4 thoughts on “Gallup’s CEO Calls the Official U.S. Unemployment Rate a “Big Lie”

  1. An additional point to reinforce Clifton’s: The labor force participation rate has dropped to a 30-35 year low — back to the level of the Carter years.

    The unemployment rate nearly doubles if the potential rather than only the participating work force is considered, especially when the focus is on the youngest and oldest partially employed, underemployed, or discouraged dropped-out workers.

  2. Clifton is right on. And he is not alone in making these statements.

    As they say: There are lies, damn lies … and government statistics.

  3. And now for the Asian perspective on this issue, from Thailand, where I live.

    From BloombergBusiness (February 2nd, 2015):

    “Thailand’s Unemployment Rate is a Ridiculously Low 0.6%. Here’s why:

    “Thailand’s official unemployment rate … [is] among the lowest in the world … ‘Our unemployment rate has been low not because of a different definition from other countries, but because of structural problems,’ said [a] Bank of Thailand spokesman … ‘The agricultural sector absorbs laborers, and those who can’t find work can always look for jobs in the informal sector or do something on their own.”

    The article goes on to say, “Because there isn’t much by way of unemployment insurance in Thailand, there isn’t any impetus to stay jobless for long. Those who lose their jobs invariably enter the so-called informal sector or seek out a part-time job, and are counted as employed.”

    This would appear to be the same phenomenon that Jim Clifton is shouting about, but other forces are at work, too. Thailand’s low fertility rate (just above one-third the fertility rate in the Philippines) and rapidly ageing population (15% of the population is over 60 years old, versus 7% in 1994) mean “there are more people retiring and fewer joining the workforce.”

    To this I feel compelled to add: I do not doubt that official unemployment statistics can be misleading, whether they emanate from Thailand, the United States or elsewhere, so it is difficult to disagree with Clifton. But by characterizing the official unemployment as a “Big Lie,” he is also politicizing an issue that really has everything to do with methodology, and not politics.

    It reminds me of the joke, “What’s the difference between a methodologist and a terrorist?” Answer: “You can negotiate with a terrorist.” Perhaps Clifton has concluded that because he can’t negotiate with the methodologists at the Bureau of Labor Statistics, he’d better negotiate some sort of solution with politicians instead.

    Clifton is a pollster — hence a statistician by definition. The very nature of the polling business means that pollsters are methodologists, too. And I am sure quite a few politicians believe poll results can be every bit as misleading as unemployment statistics.

    It is well-known that successful negotiations reflect the art of compromise. What sort of compromises affecting the integrity of political polls will Clifton have to make, while negotiating the integrity of unemployment statistics with politicians?

    If I were Jim Clifton, I’m not so sure I’d ever take such risks on board.

    Perhaps I’m too much of a methodologist.

  4. More Power to Jim Clifton !

    His picture reminds me a little of Kevin Spacey in “House of Cards”. This is meant as a compliment . . . of sorts.

    What is meant by “More Power to Jim Clitton” is that I wish he, like many other myth busters, didn’t just say something eye-opening, but also connect the dots.

    You see, what he, the master with access to all the information, tells us is not different from what the average American – or, for that matter, the average person in any of the cilivized/industrial/developed countries – has felt in their gut for some time. The connecting line between the official propaganda numbers and that gut feeling tells us what? It tells us that the average person is faced with the dilemma of who to believe: Do I believe what my gut is telling me or do I believe the learned professional scientifically calculated numbers?

    The economy is improving, they say. Then why do I feel fear when I think of the future of my family? Why do I work two jobs at lower wages than I used to while the grocery prices jump at will? Should I not feel grateful that “The Economy” is improving while I drive through town past an increasing number of empty store fronts? Should I not rejoice over being able to have credit to buy things I don’t need at prices I can’t afford? The list of mixed messages could go on for a long time. But what’s the point . . or rather the connecting line?

    It is like with antibiotics and the immune system. The more you tell your immune system that it won’t be able to cope, it will eventually listen . . and not cope. Same here, when people are told to distrust their own feelings about something, anything really. Gradually, their gut sense of reality will fatigue and eventually shut down. Add to this the likelihood that the average person will expose themselves to several hours a day of television, which also tells them what to think and feel and that every feeling in life could be sign of an illness that must be medicated. When you’re sad, you must take uppers. When you’re happy you must be bipolar. Especially children should not feel many different emotions without an adult capable of understanding them. And so on.

    This is not about pills but about the disempowerment that will incessantly break down any sense of how to make good choices in life and leave an increasing number of people with fewer and fewer decisions to make. It is by no means a metaphorical disempowerment but a tangible loss of freedom.

    What a “Land of the Free”?

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