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Counting the “Invisible Unemployed,” the U.S. Unemployment Rate Now Above 11 Percent

November 10, 2010

In case anyone needs another reason for extending all of the 2001 and 2003 tax cuts, look no further than the continued difficulties in the U.S. job market.  October 2010 marked the 18th consecutive month the official U.S. unemployment rate was stuck above 9 percent.  Meanwhile, 48 out of 50 States have lost jobs since Democrats’ trillion-dollar 2009 stimulus plan.

Yet as bad as those official conditions are, the Chairman of President Obama’s Council of Economic Advisors, Austan Goolsbee, suggests matters are actually much worse.   At least Goolsbee made precisely that argument in 2003 when the occupant of the White House was from the other party.  In a November 30, 2003 New York Times op-ed titled “The Unemployment Myth,” 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.”  Goolsbee summed up by saying that “The situation has grown so dire, though, that we can’t even tell whether the job market is recovering.”

Fast forward to 2010.  The “official” unemployment rate remains stuck near 10 percent.  And disability applications in calendar year 2009 – which Goolsbee in 2003 said “cooked the books” by keeping official unemployment artificially low — were up nearly 50 percent compared with the 2003 level.  If you counted them and the literally millions of other “invisible unemployed,” the unemployment rate today would be over 11 percent instead of the current official 9.6 percent level.

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.