The Reality Behind Employment Numbers

July 4, 2013 Updated: July 3, 2013

The latest figures on employment and job creation are encouraging. The unemployment rate is now less than 8 percent, suggesting that the U.S. economy is turning around after the worst economic crisis since the Great Depression hit in 2008. 

In reality, however, almost 50 million people in this country live on food stamps and many others need multiple jobs to sustain themselves. How can the official employment statistics paint such a happy picture?

The unemployment rate was 7.6 percent in May, 0.1 percent higher than in April, according to the latest U.S. Bureau of Labor Statistics (BLS) announcement. The civilian labor force consisted of 156 million people, with 11.8 million of them unemployed.

Without digging deeper, when one compares the May 2013 to the May 2012 unemployment rate, which was 8.2 percent, it appears that jobs are being created and filled in the United States. 

However, the official unemployment numbers do not include discouraged workers and those marginally attached. Marginally attached individuals are out of work and ready to accept a job should one materialize but who have not actively looked for work in the past four weeks.

The BLS’s unemployment number, which includes discouraged and marginally attached people, published on the alternative measures of labor underutilization table under the U-6 designation, was 13.8 percent in May, a big difference, explaining some of the discrepancy. 

U.S. Food Stamp Program Soaring

In addition, the number of recipients on so called food stamps is close to all time highs at 47.7 million.

The U.S. Department of Agriculture (USDA) administers the U.S. Supplemental Nutrition Assistance Program (SNAP), commonly known as the food stamp program.

The number of people participating in the food stamp program has increased significantly since the beginning of the financial crisis, despite the decline in official unemployment numbers. 

During the first half of 2013, there were 47.7 million people, or 23 million households, on food stamps, costing taxpayers $38.2 billion. This is 15.3 percent of the U.S. population.

Between 2008 and 2012, the number of people on food stamps increased by 70 percent, up from 28 million people in 2008. Yet, unlike the headline unemployment figure, it did not come back down after the financial crisis abated. 

Given the significant increase in food stamp recipients, there must be a lack of jobs available for people to support themselves, yet the unemployment figures do not reflect that. 

Poverty Rate and U.S. Employment 

The poverty rate can also be used to help judge the real U.S. employment situation. There is no data available for 2012 or 2013 to help establish a recent poverty rate trend; the latest Census Bureau release date was Nov. 14, 2012 and covered the year 2011. The numbers are estimates.

At the end of 2011, 15 percent of Americans were officially living in poverty, compared to 11.3 percent in 2000. This coincides with the 15.3 percent of the population being on food stamps and the number increased 32.7 percent since 2000. 

Some analysts think that even this high number is too low. They believe that the cost of living should be factored into poverty discussions.

“One major criticism is that the official poverty level is too low. … Although the cost of living varies significantly within and across states, the federal poverty level is the same across the continental U.S.,” the National Center for Children in Poverty states. 

Social scientists state that there would be many more people living below the poverty line, double or even triple the number, if the poverty line were adjusted to a more realistic number factoring in things such as cost of living in different regions. 

Based on these numbers, it is apparent that people are increasingly taking sub-standard or low-paying jobs, and so while employed, may still be living below the poverty line. This has motivated some areas to call for employers receiving government funding to pay workers a so-called “living wage,” above the national minimum wage. Currently, the U.S. federal minimum wage stands at $7.25, where it has been stuck since 2009, according to the U.S. Department of Labor. 

Job Creation

On the other hand, there is no doubt that new jobs are being created. According to the BLS, a total of 821,000 nonfarm jobs have been filled so far this year. 

In a June 19 press conference, Federal Reserve Chairman Ben Bernanke stated, “Projections of the unemployment rate for the fourth quarter of this year is 7.2 to 7.3 percent, declining to 5.8 to 6.2 percent in the final quarter of 2015.” 

However, there is no method currently that would allow a statistician to determine if the jobs created are filled by the unemployed or by job-hoppers. The following calculations are based on the assumption that all new jobs would be filled by an unemployed person.

Despite the decrease in the official unemployment rate, there are significant concerns that the recovery in employment is of low quality. Food stamps and the U.S. poverty rate are but two measures that suggest headline unemployment numbers are not representative of the true U.S. unemployment situation.