Unemployment Numbers Examined

This week, ADP showed private companies cut almost 700,000 jobs in December. A Labor Department report showed a drop in the number of people filing new claims for unemployment. On Friday, the unemployment rate is expected to jump, perhaps to 7 percent.

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MICHELE NORRIS, host:

From NPR News, this All Things Considered. I'm Michele Norris.

MELISSA BLOCK, host:

And I'm Melissa Block. Today a new report shows that people seeking unemployment benefits reached a 26-year high in the last week of December. The number jumped to 4.61 million. That adds to yesterday's bad news from another job-related report, one from the payroll firm ADP which said private jobs fell by more than had been expected. But according to NPR's Adam Davidson, there is a silver lining in these numbers. And Adam, with all this grim economic news, where is the silver lining?

ADAM DAVIDSON: All right. So, it's a very thin silver lining.

BLOCK: OK.

DAVIDSON: The people newly seeking unemployment benefits, people going to the office and saying, hey, I just lost my job, that number was less than economists expected, less than it had been the previous month, and that month was less than the previous month. So, December was a little bit less than November. November was a little bit less than October, which might make you think, OK, so maybe there's a pickup. If fewer people are losing their jobs each month, maybe this crisis is beginning to heal. Not so fast, though, say the economists.

BLOCK: Yeah, and it seems to directly fly in the face of this - what we said in the introduction here - that unemployment benefits are at a 26-year high.

DAVIDSON: Yeah, here's the thing. If you don't spend a lot of time with the numbers, you sort of think, well, there's a number of people who have jobs and then there's a number of people who don't have jobs, and the government has some way of figuring that out, and then they tell us. But it's a lot more complicated. We have this huge economy with 300 million people, 150 million in the workforce, and the government doesn't really have an easy way to figure it out, so they try a whole bunch of different things.

One thing they do is they tell every company, tell us how many people are on your payroll, that's the non-farm payroll number that we'll get tomorrow. Another way they do it is they call every state and county and say, how many people are looking for unemployment benefits? That's what we got today. They also - the Bureau of Labor Statistics calls people every month. They call 50,000 or so households and say, hey, do you have a job? Are you looking for a job?

And they compile all of this data. And very often the data is completely conflicting. It shows different pictures. And the data also doesn't include everything that you and I might think of as unemployed - for example, discouraged workers. When they call you up on the phone and say, are you out of a job?, they'll also ask you, have you looked for a job in the last year? And if you say, no, they say, you're not unemployed because you're not on the workforce.

BLOCK: And that can account for some of these discrepancies, right? People who've just given up looking for a job.

DAVIDSON: Right. And that causes even more confusion because some people say, wait, that's a really bad sign. If there's a lot of people who are discouraged and so depressed they're not even looking for a job, that tells you the economy is in really bad shape. But then other economists say those are people who can afford to take a year out of the workforce. If they were truly desperate, they'd be looking for a job. All of these ways of analyzing the data, ways of assessing the data, every single one of them has its benefits and its problems.

BLOCK: Well, how did it happen, Adam, that we have all of these different ways to measure these data?

DAVIDSON: What's interesting is before the Great Depression, the government really wasn't that interested in how many people had jobs. They had other concerns, you know, international trade and sort of the overall performance of the economy. During the Great Depression, they started seeing that this was a crucial question. They began to build models to understand the economy. And there was a general agreement, a shift in economic thinking, to think the purpose of an economy is to employ the largest number of people possible. To do that, we need to know how many people have jobs or don't have jobs. But it wasn't until the Truman administration after World War II, that it was an official rule of U.S. government policy that we want to employ the most number of people possible.

BLOCK: And Adam, more unemployment data coming out tomorrow?

DAVIDSON: Yes, we'll get a lot of data tomorrow. We'll know a lot more about the jobs picture. But we do know that economists are guessing that the unemployment rate is going to rise. It's currently at 6.7 percent. It'll rise to seven percent. That's a huge jump for one month if that does turn out to be true. And it's the highest it's been in many, many years. Although, I should note, nowhere near the 25 percent unemployment we saw during the Great Depression.

BLOCK: OK, Adam. Thanks so much.

DAVIDSON: Thank you, Melissa.

BLOCK: That's NPR's Adam Davidson. And there is more on the jobs data at the Planet Money podcast and blog. That's at npr.org/money.

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