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.

Gut Check for the American People

Heartland-Monitor-PollAfter being whipsawed by sharp economic headwinds over the past few years, how exactly do “regular people” see their position in the grand scheme of things?

We now have a reading in the form of the “Heartland Monitor” poll, a field study commissioned by Allstate Insurance Company and conducted by National Journal magazine, which queried ~1,200 middle-income Americans on a variety of topics pertaining to the U.S. economy and family finances.

The findings are an interesting blend of persistent optimism tempered by cold, hard reality. On the “sober” side of things:

 Nearly two-thirds of respondents feel that they face more economic risks today than their parents did at the same age.

 Nearly half reported that they’ve made significant reductions in spending over the past year, including putting off major purchases.

 About one-third have withdrawn funds from savings or pension funds to make ends meet.

 Approximately one-fourth have reduced contributions to their pension or retirement funds.

Beyond this, only about one-quarter of the respondents reported that they haven’t faced significant negative changes in their lifestyle or financial security.

But on the other hand, even fewer (15%) have reported falling behind on mortgage or rent payments.

Now for some viewpoints that reflect the perennial optimism of middle-class Americans:

 Nearly 9 in 10 respondents feel that America is still a land of opportunity.

 More than 55% believe that the U.S. economy will improve over the coming year (versus around 35% who believe it will worsen).

 Nearly three-fourths of respondents believe that owning a home helps rather than hinders living the American dream.

When it comes to retirement, middle-class Americans seem to be looking at things with harsh realism. Respondents who are near retirement age expect to retire six years later than those who are already retired. And a clear majority believe that they’ll retire at a later age than their parents did.

Here’s an even more interesting finding from the survey: Even in retirement, about three-fourths of the respondents anticipate that they’ll continue to work.

By that forecast alone, we can see that the very definition of retirement is changing.

More results from the Allstate/National Journal Heartland Monitor poll can be found here. It’s an interesting read.

China overtakes Japan … and who’s surprised?

Chinese + Japanese FlagsThe somewhat breathless headlines earlier this week reporting that China had nudged past Japan to become the world’s second largest economy behind the United States, didn’t particularly grab me.

In fact, it seems almost anticlimactic that Japan has finally been overtaken. Hasn’t Japan’s economy been in the doldrums for years?

In some sense, it seems like Japan has hardly mattered now for the better part of 20 years. By contrast, economies like those in Brazil, India and the Far Eastern countries have been the ones shining brightly and getting most of the business coverage.

Actually, I’m old enough to remember a time, back in the 1980s, when the rise of Japan’s economy was of huge concern to American and European manufacturing and banking organizations. “Japan, Inc.” was a continuing topic in the pages of BusinessWeek and Fortune magazines. Japanese managerial styles and its participatory worker groups were the focus of many a management seminar and how-to business book.

What happened? During the 1980s, Japan’s economic miracle turned into a massive real estate bubble before imploding in the early 1990s. What came next was a “lost decade” – a stagnant economy from which the country has never really recovered.

And today, demographics and other factors are catching up with the country. Things like low population growth (and an aging population to boot), weak domestic demand for goods, slow growth in exports, a strong currency and even deflationary pricing forces … these are the characteristics most observers assign to the Japanese economy.

Some economic miracle, huh?

Meanwhile, China keeps chugging away, charting 10%+ annual growth rates even as the average Chinese citizen continues to earn just one-tenth of what American and Japanese workers make.

But if we look a little more closely at Japan’s experience, there may be lessons for us here in the U.S. In fact, some characteristics are uncanny in their similarity. More ominously, some economists believe that China is on course to overtake the U.S. and become the world’s biggest economy inside of ten years.

That seems startling on the face of it. But when you consider the symbiotic relationship between the U.S. and Chinese economies – we’re China’s largest export customer and they hold a ton of our dollars – it becomes easier realize just how much our two countries need one another.

“Accidental allies,” it turns out.