The Fiction of Unemployment Numbers

Immediately after the jobs report came out yesterday saying that unemployment had dipped to 9.7% from 10%, the administration took the opportunity to state, albeit cautiously, that employment, and the economy in general, are improving.  But if you look at the numbers carefully, you find out that there are multiple flaws with this analysis.  First, the change was due to an adjustment to the total number of jobs - so there was no actual change – just a change to the figures.  In other words, things were .3% less bad than initially thought.  So, the same number of people were unemployed, the numbers just better reflect that group.

But, an even bigger flaw in these numbers is how irrelevant they are now that there is a middle category between employed and unemployed:  namely the self-employed.  Because many turn to self-employment when their actual employment options have run out, and because self-employed people are lumped in with the employed, these numbers quickly become a mish-mosh.  Those counted as employed range from the traditional full time worker with benefits to self-employed workers selling products and services from home, but not making a sustainable living off of their “businesses.” 

Finally, last night on The Ed Show, an economist admitted this fact.  Peter Morici, an economics Professor at The University of Maryland, pointed out that employment statistics change more based on the number of people looking for work than based on the actual quantity of people working.  So, if you worked one hour last month, you’re counted as employed.  Anyone can state that they are self-employed, and after unemployment benefits have run out, there’s no reason to continue to categorize yourself as unemployed.

And there’s another problem.  Many people, who were categorized as self-employed before the crisis, were commission only salespeople.  The entire economy slid, and obviously if larger businesses have been struggling to sell products and services, the little guy is even worse off.  It’s safe to say that many self-employed people, for example real estate agents, have become unemployed in the sense that they can no longer make a living within their industries, yet they may continue to trudge along because they cannot collect unemployment benefits anyway.  Therefore, they are completely ignored in labor statistics.

Employment has changed radically over recent years due to the growing population of freelancers and so-called self-employed workers.  This growing category of workers receives no access to benefits, such as health insurance and retirement savings plans.  They are completely ignored by politicians, because they are not counted.  While it was exciting to hear an economist speaking frankly about this reality on national television, until the self-employed are accounted for in labor statistics, the numbers will remain a convenient fiction.

I’ve begun exploring how self-employed workers fit into the new economy in my essay, Self-Employment in the Age of Knowledge – it’s a work-in-progress, but you’re free to take a look.

Download Self-Employment in the Age of Knowledge.pdf

Links:

• Labor Market Shows Signs of Reawakening in New Data

• Unemployment drops to 9.7% despite more job losses

• Unemployment Rate Drop Is Good News But It's Likely To Rise Again

• Labor Market Shows Signs of Rebirth in New Data

• After Escaping Jobless Rolls, Trauma May Linger 

• Groundhog's Day Budgeting: Again, Obama Underfunds Job Growth