The chairman and CEO of Gallup, Jim Clifton, published a commentary about a week ago arguing that the official unemployment rate “amounts to a Big Lie.” His argument rests on the definition of unemployment, which classifies people as unemployed if — let me quote from the Labor Department directly — “they meet all of the following criteria:”
they had no employment during the reference week; they were available for work at that time; and they made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons laid off from a job and expecting recall need not be looking for work to be counted as unemployed.
Mr. Clifton is correct that “if you are so hopelessly out of work that you’ve stopped looking over the past four weeks” you are not counted among the unemployed. It is also correct that even if you only do a little bit of work you are counted as employed. And he is correct that “those working part time but wanting full-time work” are not considered unemployed for the purpose of the official unemployment rate.
But Mr. Clifton goes wildly over the top by concluding from these facts that the official unemployment rate amounts to a big lie.
In fact, the unemployment rate is a time-tested barometer of the health of the labor market. It is also a conceptually reasonable measure, answering an important question: Of all the people working or actively looking for work, what share are currently without a job?
That’s a statistic I want to know.
But, of course, it isn’t the only statistic I want to know. If it were the only labor market statistic published by the government, then Mr. Clifton’s argument may be more reasonable. But it isn’t. The Labor Department publishes statistics on the number of people who are not in the workforce, the number of people who are not working or looking for work because they are discouraged about the availability of jobs, the number of people working full time, and the number of people working part time because of bad economic conditions, among many, many others.
Economists and policymakers — notably, Fed chair Janet Yellen — have been increasingly relying on these other statistics. That is a good thing. And it is good for Mr. Clifton to point out the limitations — not flaws — of the official unemployment rate.
But arguing that a statistic amounts to a lie does nothing to advance public understanding or our national conversation. Statistics neither lie nor speak the truth. User error is a constant problem. And in his essay it is Mr. Clifton, not the unemployment rate, at fault.
— Michael R. Strain is deputy director of economic policy studies and resident scholar at the American Enterprise Institute. You can follow him on Twitter at twitter.com/MichaelRStrain.