If something seems too bad to be true, it probably is. This especially applies to economic statistics. We often hear that the real unemployment rate is 15 percent, and half of recent college graduates are unemployed or underemployed. Conservatives should not believe these figures. The economy is bad, but (thankfully) not that bad.
True, unemployment is worse than the official figures suggest. The labor-force participation rate has fallen two percentage points in the recession. Demographics (i.e., retiring baby boomers) explain only a quarter of this drop. Many potential workers have simply given up on finding work. A more accurate measure of unemployment is between 9 and 10 percent.
As bad as these rates are, many conservatives are arguing that the real unemployment rate is even higher, at 15 percent. This figure comes from the U-6 rate, the Bureau of Labor Statistics’ (BLS) broadest measure of unemployment. Besides the officially unemployed, it includes those working part time for economic reasons and “marginally attached” workers.
However, many of the marginally attached never return to work, no matter how the economy does. Jobs were plentiful in the late 1990s tech boom, but even then marginally attached workers were far more likely to drop out of the labor force than start working. The U-6 rate stayed between 7 and 8 percent. Many of the workers counted in the “real” unemployment rate do not actually want a job. Thus, the “real” U-6 unemployment rate says little about the economy’s health.
Similarly, the labor market is especially tough for younger workers. While job losses have fallen to below their pre-recession levels, job creation has not yet recovered. Newly graduating workers have difficulty finding work. About 14 percent of 20–24 year olds are unemployed.
Now a new study finds that half of recent college graduates are unemployed or “under-employed” in jobs below their skill level. This sounds shocking . . . until you look under the study’s hood.
“Under-employment” is highly subjective. The study uses government estimates of whether a particular job requires a college education. These estimates find fewer jobs need a college degree than employers think need one. As a result, the study’s measure always shows high underemployment no matter how the economy does. It found that in 2000, at the height of the tech bubble, 41 percent of college graduates were un- or under-employed. That contradicts almost everyone’s impression of the economy in the late ’90s. This report says little about college graduates’ ability to find good jobs.
Unemployment is not “really” 15 percent. Far more than half of college graduates can find work. Conservatives should not rely on or repeat these inaccurate statistics. Doing so would endorse their flawed measurements — which would soon come back to haunt us. These are the same figures liberal economists use to justify a redistributive welfare state. Accepting them means agreeing the economy only varies between shades of bad and worse.