In a November 30, 2003 New York Times op-ed titled “The Unemployment Myth,” former Obama chief economist Austan Goolsbee argued that “the government has cooked the books…in order to reduce the unemployment rate.” How? By failing to count “the invisible unemployed” among the official unemployed. By not counting those who have stopped looking for work, including those who applied for government disability payments, Goolsbee maintained that the unemployment rate in 2003 – which officially peaked above 6 percent – was significantly understated: “if you correctly accounted for all of these people, the peak unemployment rate in this recession would have probably pushed 8 percent.”
Fast forward to 2012. The “official” unemployment rate for December 2011 was reported to be 8.5 percent, the lowest level since President Obama’s first full month in office. But following Goolsbee’s logic, nobody at the White House should be breaking out the bubbly and the party hats. As Ezra Klein of the Washington Post noted today, “[I]f not for the millions of discouraged workers who have left the labor force since 2008, [the unemployment rate] would be nearer to 11 percent.”
The following displays the current “official” unemployment rate of 8.5 percent compared with the 10.9 percent rate which includes the “invisible unemployed” who have “stopped looking for work,” as Goolsbee put it in 2003. Meanwhile, as shown in the blue line, the Administration predicted the official unemployment rate in December 2011 would be 6.2 percent under its 2009 stimulus plan:
Sources: January 2009 Romer/Bernstein Report ("Administration Prediction With Stimulus Plan”), actual U.S. Department of Labor data and Ways and Means Republican staff calculations of invisible unemployed. The “invisible unemployed” are defined as unemployed persons not included in official unemployment rate calculations because they are not currently in the labor force, compared with the month Democrats’ stimulus passed (February 2009). This includes people who quit looking for jobs since stimulus passed and dropped out of the labor force, plus other working-age adults who never entered the labor force, but presumably would have if the labor force participation rate was the same as when stimulus passed.