How Many Jobless?

May 5, 1958

When, in the 1930s, some economists began seriously discussing just what is statistical “unemployment,” old Hugh Johnson retorted in one of his angriest columns: “Ask the man who’s out of a job!” But the problem does not yield to mere invective. You can find lots of people in Miami or Las Vegas who have no particular job but are not worried. Millions of women and children are without jobs. In fact, the population of the United States is about 173 million, and as there are only some 62 million employed, there must be today not merely 5 million, but 111 million “unemployed.”

For the statisticians, however, the “unemployed” consist only of those in the “labor force” who are not employed. Just how is the line drawn between the 67.5 million who are counted as part of the labor force and the 105.5 million who are not?

Here is how the U.S. Bureau of the Census describes how it decides: “Monthly estimates of the population of working age [14 years and over] showing the total number employed, the total unemployed, and the number not in the labor force are obtained from a scientifically selected sample of about 35,000 interviewed households in 330 areas throughout the country.” So the estimate of unemployed is in large part based on a sample of only one in every 1,400 households in the country.

SHIFTING ‘LABOR FORCE’

The bureau goes on: “The unemployed total includes all jobless who were looking for work.” How is the number of such persons estimated? From replies to the interviews. What constitutes realistically looking for work? The interviewers must rely in large part upon the realism of the replies. The labor force is not even a constant percentage of the total (“noninstitutional”) population. In July of last year it was 60.6 percent; but in December only 58.1 percent.

Some paradoxical results emerge. The last monthly report, for example, opened as follows: “Employment rose by 300,000 between February and March . . . while unemployment was unchanged.” How is that? The layman would naturally expect that if employment rose 300,000 in March unemployment would drop that much. The statisticians’ answer is that the “labor force” increased by that much.

The “labor force” increases partly by census estimates of the population reaching working age, etc., but also partly by changes in people’s decisions. Suppose a man has a good job, with a wife at home and a son and daughter in college. He loses his job, whereupon not only he, but his wife, his son, and his daughter start looking for work. Because one person has lost his job, four persons are now “unemployed.” So “unemployment” goes up faster than employment goes down. There were 1.4 million more persons employed this March than in 1954; yet 1.6 million more were unemployed.

DEFINING UNEMPLOYMENT

Let’s turn now to the Department of Labor: “Effective January 1957, persons on layoff with definite instructions to return to work within 30 days of layoff and persons waiting to start new wage and salary jobs within the following 30 days are classified as unemployed. Such persons had previously been classified as employed. . . . The combined total of the groups changing classification has averaged about 200,000 to 300,000 a month in recent years.” So the “unemployed” have increased some 300,000 since the end of 1956 simply by a change of definition!

Among the conclusions to be drawn from all this are: (1) The government figures of unemployed are merely estimates, subject to error. (2) Statistical unemployment of several millions, or 3 or 4 percent, may exist even when there is a definite “labor shortage.” (3) Not every “unemployed” person is necessarily in distress. (4) The existence of some statistical or “frictional” unemployment is not necessarily an evil. There are always some people who prefer to be temporarily unemployed rather than accept or keep a job or wage that does not suit them. In a free economy, 100 percent “full employment” is never realized. But in such an economy there is always a tendency toward full employment, if prices and wages are flexible, without the need for perpetual inflation.