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Sunday, December 9, 2012

Unemployment rate falls when unemployed people are called "employed"

by Clifford F. Thies

Hurricane Sandy resulted in the deaths of 191 people, caused $60 billion of damage, left 40,000 Americans homeless, disrupted electric service to 5 million people, stranded travelers due to 20,000 canceled flights, and shut the New York Stock Exchange for two days. But, it didn't cause anybody to become unemployed.

According to the official definition of "employed," a person is counted as employed even if he or she didn't work during the reference, if they didn't work because they were (a) on vacation, (b) ill, (c) experiencing child care problems or were on maternity or paternity leave, (d) were involved in an industrial dispute, or (e) prevented from working by bad weather. Notice that? "Prevented from working by bad weather." Normally, this is the correct way to handle the disruption of work caused by weather. But, Sandy wasn't normal. How many of the people whose work was disrupted by Sandy will be able to soon return to work is a question for which the assumption of "all of them" is clearly incorrect.

Thus, the entire media was pawned by the Obama Administration in the most recent labor market report. "Unemployment down despite storm," is the banner headline of my local paper, with a by-line going to an "AP Economics Writer." I don't mean to single out the particular author. Nobody asked the right question when the Department of Labor issued its report.

Considering that perhaps a hundred thousand people were incorrectly described as "employed," when they should have been described as "unemployed" in the just released November labor market report, the rest of the report makes sense. The unemployment rate went up as labor force participation and average hours worked went down. Another month, in our Obamanated economy, when more people lost hope of ever again finding a job, or else learned to eke out a living on part-time work supplemented by food stamps and other government assistance.

Dr. Thies is a professor of economics at Shenandoah Univ. in Virginia. Image - Iowaworkforce.com

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