By Haddon Libby
Abbott & Costello have a great routine where Lou Costello makes 13 x 7 = 28. While you and I know Costello to be wrong, he provides ample proof that his math works.
Last week, the County of Riverside came out with new unemployment numbers for the region that show the unemployment rate dropping to 8.9% for December, down 2% from a year ago. This improvement was done by reducing unemployment by 40,000 people despite the growth of the population base by 30,000 to 2.3 million people and creation of only 17,000 jobs over that one year period. Mathematically, 7,000 people went missing. Where did they go?
Before asking Costello, we have another problem with County statistics. The County states that 71.1% of the county’s population is participating in the worker pool (known as the Participation Rate). For the State, the average participation rate is approximately 65% while the national number is 63%, both historic lows. Given that our County has a large number of families with children and an above average number of retirees, it is hard to believe that our county has more working age people than other places. Also missing from statistics is the large number of undocumented people living in the County.
Different State statisticians have stated that the real unemployment rate (also known as the U-6 unemployment rate) in our County is 25%. How can the official number be 8.9% when the unofficial number is 25%. Also, if 71% of all people are of working age, that would mean that the real participation rate should be 87%? Something is wrong.
The problem can be found in how the County estimates employment levels – they poll a small number of people. It seems clear that the sample group is not representative of the population. Stated differently, County statistics are no more than a calculated guess based on bad data.
This apparent understatement of unemployment levels means that special government funding for high unemployment areas goes away. Because Los Angeles County has a true (U-6) unemployment rate of 20%, they receive special federal assistance. The loss of this special status represents a loss of more than $100 million in additional monies for Riverside County alone. The misleading unemployment rate also masks more serious problems inside of our local economy.
This masking of real unemployment levels is nothing new – it has been going on since the Kennedy Administration with the elimination of ‘discouraged workers’ being the biggest adjustment. Since Obama came to office, the exclusion of workers via the Participation Rate as well as the inclusion of workers as employed when they have only part-time work but want full-time work has made unemployment numbers look much better than reality.
While the headline unemployment rate (U-3) in December for Riverside County was 8.9%, 8.3% in California and 6.7% nationally, the real (U-6) unemployment rate according to definitions prior to fifty years of tinkering was at least twice as much. In truth, at least 1 in 7 Americans nationally want full-time work while that ratio increases to 1 in 4 for the Coachella Valley!
Despite our critical need for more federal assistance and a greater sense of urgency in addressing the problem, resources are being reduced due to a poor survey method that by definition artificially understates the gravity of local employment problems.
By the way, those 7,000 missing people exist – you just can’t use Abbott & Costello math to find them. The nice thing about Abbott & Costello math is that you can also forget a whole lot of other folks who are hurting badly due to the longest economic slump in 80 years.