America’s Hidden Unemployment Crisis
In a June 6 speech to the World Affairs Council of Philadelphia, Federal Reserve Chair Janet Yellen said that the U.S. economy was “now fairly close to the … goal of maximum employment.”
At a jobs fair held in Newburgh, New York, on Oct. 5, Drew Smith begged to differ. A former stock broker and trader for 27 years, Smith has been unemployed and looking for work for four years. The full parking lot he surveyed as he walked into the fair reinforced his belief that the unemployment rate is much higher than the official numbers.
The Bureau of Labor Statistics (BLS) said unemployment in June was 4.9 percent—the figure Yellen had in mind when she said the United States was close to maximum employment. In the September jobs report, that figure inched up to 5 percent.
In the gap between Yellen’s and Smith’s unemployment estimates lies an unacknowledged catastrophe, as tens of millions of Americans either can’t find or have given up on looking for work. This crisis involves two distinct problems: There are large numbers who are looking for full-time work but can’t find it, and there are large numbers who have accepted not working as a norm.
This group of the non-working has been almost invisible to society, but it presents unique problems. Having a large number of adults give up on work weakens the economy and represents a staggering waste of human potential.
To begin to understand this story, one first has to look at the numbers.
The unemployment figure Yellen referenced is called the U3 unemployment rate. It measures everyone who has actively sought a job in the past four weeks and is what people most often refer to when they discuss the unemployment rate.
In a letter published on his company’s website, Jim Clifton, the CEO of the Gallup polling company, called the U3 rate “extremely misleading” and “a big lie.”
Clifton points out that if someone is discouraged and has stopped looking for work, then that person is not counted in the U3 number as unemployed. He also notes that if someone works just one hour a week and is paid $20, he or she is not counted as unemployed.
Gallup publishes on its website the U6 unemployment rate, which it calls “real unemployment.” This is the BLS’s most capacious unemployment rate, including all of those counted in the U3 rate plus “discouraged workers,” “marginally attached workers,” and those “employed part-time for economic reasons.”
The marginally attached are defined as people who have looked for work sometime in the past year, but not in the past four weeks. The discouraged are those who have not looked for work in the past year because they believe there is no work available to them or none for which they would qualify. Those who are employed part time for economic reasons would like a full-time job, but can only find part-time work.
The September U6 rate was 9.3 percent, which translates into 14.87 million unemployed. While this rate gives a fuller picture than the U3 rate, it does not count those who have stopped looking for work for longer than one year, individuals whom the BLS classifies as “not in the labor force.”
Not in the Labor Force
In June 2016, the President’s Council of Economic Advisers released a report titled “The Long-Term Decline in Prime-Age Male Labor Force Participation.” The report notes that since 1965 the labor force participation rate of men in their prime working years (defined as ages 25 to 54) has steadily declined. In 1965, the number of men in their prime who were employed or unemployed and looking for a job was 96.7 percent. As of May 2016, that figure had dropped to 88.4 percent, meaning that 11.6 percent were not looking for work.
Nicholas Eberstadt, who holds the Henry Wendt Chair in Political Economy at the American Enterprise Institute, has written a book about these men titled “Men Without Work: America’s Invisible Crisis.”
Eberstadt reports that in 2014 there were 7.2 million prime-working-age men not in the labor force. But this number understates those missing from our labor force—unemployed but not counted in the unemployment figures—by failing to account for men outside the ages of 25 to 54.
In an interview Eberstadt said, “If American men over the age of 20 just had the same work rates that our society had back in 1965 … there would be almost 10 million more men with paid jobs.”
Eberstadt points out the 7.2 million also misses the declining situation for women. While up to the year 2000 women’s labor force participation rates had been steadily improving, since 2000 those rates have been dropping similarly to men’s.
Calculating from data published by the BLS for 2014, an additional 3.6 million women would have had jobs in 2014, if they had been working at the year 2000 participation rates.
If 13.6 million long-term discouraged workers are added into the current BLS labor force number of 159.9 million, the unemployment rate swells from the U6’s 9.3 percent to 16.4 percent.
This estimate of the unemployed depends upon the surveying done by the BLS. John Williams of the Shadow Government Statistics newsletter calls those surveys into question.
For three decades, Williams has been a private consulting economist whose clients pay him to make sense of the government’s often difficult-to-interpret economic statistics. Each month he painstakingly goes over the minutiae of official data on unemployment, GDP, household income, trade, and more, and sends his estimated corrections to the data to his clientele.
In a commentary on his website, Shadowstats.com, Williams says that in 1994, when the BLS redesigned how it gathers and delivers unemployment statistics, it redefined discouraged workers so that they were no longer counted after one year. Previously they had been counted for as long as they were discouraged. The BLS also changed the survey questions. The changes made it meaningfully more difficult to identify long-term displaced workers, Williams says.
The BLS uses two surveys to measure employment and unemployment: the Current Population Survey, or household survey, and the Current Employment Statistics, or payroll survey. The household survey is of 60,000 eligible households and the payroll survey is of 146,000 businesses and government agencies.
Williams sees significant flaws in both surveys.
The household survey is modified with seasonal adjustments, which are necessary because of regular, seasonal changes in the labor force occasioned by events such as the start of the school year and the Christmas holidays.
The difficulty is that the BLS calculates each month’s adjustments on a different basis, which makes month-to-month comparisons of the data useless.
The payroll survey is made inaccurate by the BLS’s use of something called an upside bias factor.
“Following the 1983 recession, the BLS had the political embarrassment of undercounting job growth,” Williams said. “This was explained to me by the person at the BLS who handled the numbers. And so they started adding a ‘bias factor’ each month to increase the job numbers.
“They began getting criticized for this, and so they developed the Birth-Death model, which claimed to count the number of jobs gained from new businesses starting versus those lost by businesses failing.
“The Birth/Death model has a different name, but it is really the same thing they began doing in 1983.”
A commentary on Williams’s Shadowstats website estimates that in the 12 months prior to this September, the Birth-Death model added 846,000 jobs to the employment numbers reported by the payroll survey.
“The BLS cannot measure meaningfully the impact of jobs loss and jobs creation from employers starting up or going out of business on a timely basis,” reads the commentary. “Such information simply is guesstimated by the BLS.”
Williams says the decline in the BLS’s U3 unemployment number since the Great Recession has mainly occurred because discouraged workers who’ve stopped looking for work for more than a year are no longer counted in the labor force. As the labor force decreases, then the same number of employed workers becomes a larger percentage of it, which means the unemployment rate goes down.
Researchers at the Federal Reserve have argued that the decline in the labor force is due mainly to the baby boomer generation retiring. Williams called this “nonsense.”
He pointed out that many baby boomers are continuing to work past retirement age, and many who are not working want to work, because they can’t make ends meet.
He pegs the unemployment rate at 23 percent.
Whether the “real” unemployment rate is 9.3 percent or 16.4 percent or 23 percent, most Americans don’t have the information they need to understand the misfortune of unemployment suffered by vast numbers of their fellows. This ignorance makes recognizing and responding to the problem of long-term unemployment more difficult.
For instance, when Yellen declared in June that the economy was nearly at full employment, the press reported her remarks uncritically. Readers were generally not given any context as to what the U3 unemployment rate actually measures. Nor were they told that the numbers of jobless people might be much greater than the U3 estimates. This has been typical of most reporting on unemployment, although there are occasional articles critiquing the statistics.
This uncritical reporting may be a consequence of the BLS’s 1994 redesign of its reporting, which resulted in the unemployment rate becoming more difficult to understand. The fact that busy journalists would take the bureau’s featured unemployment statistic at face value is not surprising.
Beyond the news coverage, though, our society may have changed in ways that cause its elite decision-makers to be less familiar with the lower class and therefore less able to respond to the crisis of unemployment.
To explain this change, Eberstadt points to Charles Murray’s description of a new upper class separated from the rest of society by a bubble. In his book “Coming Apart,” Murray argues that the United States has in the last five decades developed a new class system.
The new upper class comprises the experts and leading figures in technology, business, politics, academics, the media, entertainment, and culture who make decisions for everyone else. Gathered together in select zip codes, the members of this new class tend to have high incomes, go to the same elite schools, share the same culture, and intermarry with one another.
Increasingly, these experts are less likely to know well anyone who is experiencing persistent unemployment.
At the same time, the long-term unemployed have tended to be quiet. One hasn’t seen protests demanding jobs or that society help them.
Williams, though, said they have begun to make noise. The white working class has rallied behind Donald Trump, Williams said, because Trump says things can be changed.
Unemployed and Not Looking for Work
Eberstadt’s book “Men Without Work” describes a group of men who have simply given up on working.
According to the BLS , this withdrawal began in earnest in 1965, when 96.7 percent of prime-age (25 to 54) men were in the workforce. That percentage has decreased steadily, reaching 88.4 percent in May 2016.
The BLS reports that in 2014, 7.2 million prime-age men were not in the workforce. Looking at census data, Eberstadt found that from 1994 to 2014, on average 14 percent were looking for work, which means 86 percent were not looking for work. In 2014 numbers, this is approximately 6.2 million men.
According to census data, those absent from the workforce for education and training constitute about one in nine of those not in the workforce, or about 800,000. Subtracting these leaves a group of about 5.4 million not looking for work.
Not surprisingly, this group of 5.4 million is found disproportionately among the most vulnerable in society.
According to the BLS, in 1964 the labor force participation rates for prime-age men of different educational levels were almost identical, with those with a bachelor’s degree or more at 98 percent and those with a high school diploma or less at 97 percent.
In what may be a residual effect of racism, black prime-age men are much more likely not to be in the labor force than whites or Hispanics. According to the Council on Economic Advisors, the labor force participation rate for blacks was approximately 78 percent in 2015, while that for Hispanics was at around 91 percent and non-Hispanic whites around 89 percent.
Using the BLS’s National Longitudinal Survey of Youth, Eberstadt found that men “with at least one spell in prison always have the lowest employment rates.”
Family arrangements matter too. Men who were married or who lived with children in the household were more likely to be employed.
Sources of Meaning
Using a BLS survey on time use, Eberstadt found that those prime-age men classified as “not in the labor force” spend 2,150 hours a year on average—what amounts to a full-time job—on “socializing, relaxing, and leisure.”
In particular, for those not in the labor force who are not full-time students, watching TV occupied almost 5.5 hours a day.
Eberstadt cites a study by the National Opinion Research Center that reports 31 percent of those not in the labor force admit to using illegal drugs.
BLS data indicates those not in the labor force who are not enrolled as students spend less time volunteering in their communities or caring for family members than men who are employed or looking for work. They are also less likely to vote, read a newspaper, or go to church.
According to the Census Bureau, in 2014 prime-age men not in the labor force consumed on average $5,700 a year in government benefits, compared to $500 for the employed. Those not in the labor force also received support from family members.
Eberstadt writes that “to a distressing degree these men appear to have relinquished what we think of ordinarily as adult responsibilities.”
These troubled men seem to be turning their backs on what are usually considered the sources of meaning for human life: family, work, and religion. Millions are living a life without the dignity of work or the possibility of a life elevated by a vocation.
Eberstadt writes that these millions dropping out has lead to slower economic growth, greater inequality, and higher deficits and national debt, while increasing family breakdown, welfare dependence, and the practice of women supporting jobless men.
This problem of men not in the labor force has grown in size and intensity for 50 years, and since 2000 the problem has grown to include women. As robots diminish the need for human labor, the need for society to find solutions grows more urgent.
In his review of “Men Without Work,” former Treasury Secretary Lawrence Summers writes that for two generations we have already seen technology cause job destruction. In part due to the increasing pace of technological change, he expects that “one-third of all men between 25 and 54 will be out of work by mid-century.”
Eberstadt sees this danger as a spur to action: “However acute one believes the coming displacement may be, this should only reinforce our interest in focusing a spotlight on this invisible crisis.”
Unemployed and Looking For Work
Daphne Brewster, 53, has been unemployed for at least 10 years, during which time she cared for her elderly father. Getting back into the workforce is difficult, she said.
“It’s stressful,” she said. “It’s like a shellshock. What you used to know is not true anymore.”
Brewster spends her days sending out resumes and trying to network. She has sent out dozens and dozens of resumes and had a couple of interviews. She has been to training programs to refresh her skills and even shadowed someone on the job for a week.
But it takes its toll.
“It’s not the greatest. I can’t afford things I used to be able to afford,” she said. “I don’t want to become homeless. I want to be able to provide for myself and my future.”
She is looking for an administrative assistant or executive assistant role.
Gerald Taft, 61, says he needs another 6 to 7 years of work before he can retire. He was made redundant in April after 10 years at a contracting company in the accounts payable department.
So far, Taft has applied for about 20 jobs and has just started some weekend work at a home for young people and adults with behavioral problems. He said job hunting is “a numbers game.”
Taft still gets up at 5 a.m. every day and attributed his positive outlook to his mother.
“My mother was a very strong woman,” he said. “You can knock me down, I’m going to get back up.”
He said he gets disappointed “from time to time” with the job search, but “I can’t give up.”
Yvette Pabon, 43, has sent out more than 100 resumes and has had close to 25 interviews—but no job.
“This process has definitely humbled me,” she said. “It tests my confidence level.”
It is the first time she has had to look for a job in 10 years—she was made redundant in December and has been looking ever since.
“I condition myself to get up as if I’m going to work,” she said. She searches on her computer, uses LinkedIn, and attends workshops to try to land a job.
“It’s pretty scary,” she said. “There have been times when I’ve had anxiety.”
Pabon finished getting her master’s in public administration last year and has 20 years experience in retail management in the private sector—but with no experience in the public sector, she is finding it hard to break through.
The job interview process has changed in the last decade, too, she said. Whereas one to two interviews used to be the norm, now it’s four to five. And she is aware that her next boss might be 20 years her junior.
“The older you get, the more challenging it is,” she said.
Pabon’s dream is to “be in a job where I can really make a difference.” She enjoys being a manager and a mentor and wants to work in an organization that values a work-life balance.
Rosemary Cano is 65 and lives in Whittier just east of Los Angeles. She was laid off from her job as a physical therapy aide due to company downsizing in 2010, and since then has been struggling to find permanent work.
“I couldn’t find a job at all,” she said. “I ran out of unemployment, so I [was forced to] go on social security.”
But her $688 a month social security payments were not enough. Cano is now just looking for supplemental work to pay her bills, but said she’s run into a lot of employers who have refused to hire older people, such as herself, even if they are fully capable of doing the job.
“I know people that are sleeping in their cars right now because they can’t live off their social security and nobody will hire them because of their age,” she said.
Cano’s bank offered her a temporary loan modification for her mortgage when she lost her job. However, she was unable to find permanent work before the modification expired, and in order for the bank to continue financing her loan, she was told she had to make a $10,000 payment by the end of the month.
“I told them, ‘Please take my [monthly] payment. Just take it. I’ve saved it.’ They said, ‘We can’t because you need $10,000.’ I said, ‘But you never warned me that I was going to have to come up with $10,000.’ Nowhere on my contract does it say that.”
Her home is now in foreclosure.
“You feel like you’re nothing,” she said. “There’s not a time that I haven’t even thought about suicide, because you feel hopeless.”
For the last four years, Cano has spent nearly all her time off at a WorkSource California center near her home, where she can search for jobs and fill out applications online.
“I used to come every single day, but now I don’t have enough gas in my car to come every day, and I don’t have a computer, because I can’t afford all this stuff at home. Everything’s gone.”
After working part time and raising children as a stay-at-home dad, Patrick Dulak, 61, of Putnam County, New York, is looking to re-enter the work force.
He formerly worked full time as a contractor in the electroplating industry, but he finds there are fewer jobs there than before.
“More and more manufacturing has gone overseas,” Dulak said. “It can be a dirty, polluting industry if you don’t do it right, because the benefits of say going over to China are there. Cheap labor, pollution standards aren’t as strong.”
He has looked for work for a few months, but so far has found potential employers often don’t reply to his applications.
He understands his age may be a liability in his job search. “How long I will be around” is probably a big question any employer has, Dulak said.
But he also knows that with his age come some positives. “I bring experience and essentially can be a self-starter in most situations.”
With the holidays coming, Dulak knows seasonal retail work will be available, but his eye is on something that meets his career expectations.
Drew Smith, 58, of Goshen, New York, has been looking for work for four years. He worked 27 years on Wall Street, which was followed by stints in insurance and retail.
Smith was a broker and trader on the New York Mercantile Exchange floor, but after it computerized, there was no longer a trading floor.
Being unemployed has been tough: “You try to keep a brave face. Try to keep upbeat. The worst part about it is the rejection. And then sort of depression sets in. And you fight that.”
“I am always fighting that [feeling down],” Smith said. “Every day you wake up. Make sure you make the bed. Go down and face the computer. And it is just like more dead ends, send out more résumés, more dead ends.”
Smith estimates he has sent out 300 résumés over the past four years. With extended unemployment, his financial situation is becoming more difficult. He reports his bank account has gone down drastically, he has cashed in his stocks and bonds, and borrowed against insurance policies.
He serves on the board of directors for a local theater company, which he says helps.
“I have devoted a lot of time to that,” Smith said. “I have been relying on this, I fall back on it, for a sense of purpose. Unfortunately, they don’t pay.”
Deirdre Campbell of Middletown has had the advantage of knowing long in advance that she will lose her job. Her last day at Pfizer, where she has worked as an executive assistant to the site leader, will be Oct. 28.
Pfizer is moving the jobs from her plant “because it is cheaper to make things overseas, although that is not what they say,” Campbell said.
Her plant used to make baby vaccine and Centrum. The vaccine is now being made in Guayama, Puerto Rico and Centrum in Gwrych Castle, Ireland.
The Pfizer plant opened in 1907 and its closing has stretched out over five years. During that time, Campbell has seen “generations of people, families” lose their jobs. “So, it’s kind of hard,” she said.
Pfizer, however, has been “very transparent” throughout and done “very much” to help the workers losing their jobs. It hired employment services and résumé writing classes and brought in different federal bureaucracies to let the employees know what services are available to them.
Campbell, who is in her forties, had a meeting the week before with someone who explained the training available through the Trade Act Agreement to those whose jobs have moved overseas.
She says she “is not ready yet” to make a change, but she has started to look around. She is determined “to be positive and just move forward.”
Relsiea Pruner, 43, of Verbank, New York, feels she has grown due to her experience of unemployment. It has been five years since Pruner has had a full-time job, and during this time she has cobbled together contract work as substitute teacher for several school districts.
While she continues to apply for full-time teaching positions, she feels the market in New York is saturated–she says each teaching job has between 300 and 2,000 applicants. She is turning her job search more toward business, in which she has ten years of experience.
Pruner has found unemployment “financially limiting and disabling” and also very frustrating.
She feels the official statistics don’t show the reality of unemployment, which she feels has gotten worse or remained the same.
And Pruner is frustrated that the market doesn’t recognize her skills. “The job market will not consider your skillset unless it has been recent—within 3 months to a year to two years—and deems your skills kind of outdated,” she said. In this scenario, she finds her diverse background of business and education, which she feels is a strength, does not open doors for her.
In response to a difficult environment, Pruner said she has learned how she “can adapt, and change, and acclimate myself.”
The job search has been very demanding in the time it takes and in how it requires constant vigilance. “You have to be on your guard with your eyes and ears open, and can never be looking in enough directions it seems,” she said.
Still, Pruner said her experience of unemployment has “made me become more well rounded and open minded, and I have learned to think outside of the box.”
And she has learned, “You look for the pluses in the meantime, and that has made me happy for what I do have…and that will help you persevere.”
Rick Childs, 52, of Leadville, Colorado, is a construction worker who feels he is getting priced out of the job market.
Laid off three weeks ago, he is busy looking for work. He says the construction industry in Colorado is being changed by an influx of illegal immigrants.
On his last job, Childs said the ratio of Hispanics to whites was 75 to 2. The wages paid the Hispanic workers, Childs said, are lower.
“White construction workers are becoming extinct,” he said.
With his time off, Childs has fixed things around his house, and taken care of medical and dental appointments. He enjoys being off, but is already feeling a financial pinch. He won’t be able this month to pay his credit card bills or his mortgage payment.
He has sent out around 20 job applications, and is looking for a possible career change. At 52, Childs is not sure his body will hold up until retirement under the rough work he has been doing.
But to be eligible for a less physically demanding job, he needs training. The last time he was laid off, he tried applying for grants to cover training, but didn’t receive anything.
Without a job, he can’t cover tuition. But if he is working, he doesn’t have time for school.
Charlotte Cuthbertson in New York, Jim Fogarty in Leadville, Colo., and Sarah Le in San Gabriel Valley, Calif., contributed to this report.