Feb. 7—The official U.S. unemployment rate released last month by the federal Labor Department is 4.7 percent—but how accurate is that figure?
Not very, according to a new report by the Center for Economic and Policy Research (CEPR), which issued a new report that finds the nation’s unemployment rate could be as much as 1.4 percentage points higher—6.1 percent. That means there could be nearly 3 million fewer people working than the official numbers claim.
The report, Missing Inaction: Evidence of Undercounting of Non-Workers in the Current Population Survey (CPS), says the CPS, a monthly survey conducted by the U.S. Census Bureau for the Labor Department, overstates the employment rate by 1.4 percentage points for all workers and greatly undercounts the number of unemployed African Americans and Latinos.
“This corresponds to roughly 3 million fewer people working, almost as big a drop in employment as in a typical recession,” says John Schmitt, an economist for CEPR and main author of the report.
The CPS is based on answers to a monthly survey, but the report shows a large and growing portion of the population does not respond to the CPS, and that non-responders appear more likely to be unemployed than people who take the survey.
New Job Pay Less, Wages Decline
The CEPR’s report follows more confirmation that the jobs that have been created in the past four years pay less than the jobs lost and that wages have slowed down and even declined. The federal Bureau of Labor Statistics (BLS) reported Jan. 31 that wages and benefits paid to civilian workers rose last year by the slowest rate in nine years and when inflation is factored in, overall compensation fell by 0.3 percent, the first such decline since 1996.
Another study, The Role of Metro Areas in the U.S. Economy, prepared for the U.S. Conference of Mayors, shows new jobs created pay on average $9,000 less per year than the more than 2 million jobs that were lost.
Labor Department Survey Overstates Employment Rate of Blacks, Latinos
The study found that the CPS overstates employment rates for blacks by about 2 percentage points, with the gap for younger African American men as much as 8 percentage points higher. The CPS also overstates employment rates of younger Latinas by about the same margin and younger Latino men by 3 to 6 percentage points.
A new survey by the Center for American Progress shows that since 2001, the share of employed black men fell by 3.8 percentage points, the employed share of white men fell by 1.9 percentage points and Latino men by 1.8. The study also found the share of employed African American women dropped by 2.7 percentage points, while the percent for Latinas is 1.4 and for white women, 0.9.
The CPS also is the source for the government’s most important statistics on the labor market, including the unemployment rate, poverty rate and health insurance coverage, and the report warns that these widely reported numbers probably are understated as well.
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