“They have this phony number, 5.2 percent. Everybody that quits looking for a job is considered statistically a person that has a job. It’s a phony number. You probably — real numbers like 22, 23 percent. In fact, if you look at crowds like this and crowds wherever I go, if we were really at five percent, 5.2 percent, nobody would be there.”
— Donald Trump, speech at Liberty University, Jan. 18, 2016
“You have 60, 70, 80 million people out there that want to work that aren’t getting jobs.”
— Trump, interview on NBC’s “Meet the Press,” Jan. 10, 2016
For a supposedly successful businessman, Donald Trump has remarkably little understanding of employment statistics. In fact, he often utters contradictory “facts” depending on the venue. At Liberty University, he said that the real unemployment rate is “22-23 percent,” but in the past he has asserted it was as high as 42 percent.
Let’s take a closer look at how Trump keeps getting these numbers wrong.
The most commonly-reported unemployment rate from the Bureau of Labor Statistics is officially known as the “U-3” rate. This is one of six different “labor utilization” rates issued every month by the agency. The U-3 rate reflects people who are actively seeking jobs but cannot find one. As of December, that was 5.0 percent of the labor force above the age of 16.
The estimate of unemployment is based on a monthly sample survey of 60,000 households. The BLS did not come up with this definition of unemployment willy-nilly; it actually reflects an internationally-embraced definition set by the International Labour Organization — that the “unemployed” are people who are not working but have actively searched for work, are available to work and are willing and able to work for pay.
While Trump claims that people who quit searching for a job are counted as having one, in reality they are simply not counted as being unemployed in the the U-3 rate. But the BLS has other measures that do count those people as unemployed.
For instance, there are people who are considered “marginally attached to the labor force.” These are workers who are not looking for work, but would like a job; they may, for instance, be discouraged by the lack of apparent opportunities. If you add in those possible workers, you end up with what is known as the U-5 rate. That was 6.1 percent in December.
Finally, the BLS produces a rate that include people who are employed part-time — but want and are available for full-time work. This “U-6” employment rate is 9.9 percent.
Some economists might argue that the U-6 rate provides a more accurate picture of the unemployment rate, and we wouldn’t necessarily dispute that. But one generally shouldn’t fixate on month-by-month swings in a particular unemployment rate and instead should look at how it has performed over time.
Here’s the U-3 rate since 1970. You can see that 5 percent is pretty close to the lowest it has been over the past 45 years — 3.9 percent.
The survey questions for the U-6 were revised in 1994 and so the data only goes back 21 years. But again, you can see that the trend line even for this higher rate has dramatically improved in recent years, though it still has room for improvement to hit a previous low of 7.0 percent.
In other words, the employment picture now is relatively good. The U-6 rate is even under 10 percent.
So why does Trump claim 23 percent? We have no idea, since as usual his campaign refused to explain his reasoning. But a clue might stem from his comments on “Meet the Press” — that “you have 60, 70, 80 million people out there that want to work that aren’t getting jobs.”
That’s a big range of 20 million people. But it’s a bit of pullback for Trump, who a few months ago asserted that there were 93 million people out of work, or 42 percent unemployment. He appeared to be referring to the labor force participation rate, but that 93 million number (as of December, 94 million) mainly reflects the number of people who have chosen not to work, such as retirees, students and stay-at-home parents. (After all, 10,000 baby boomers retire every day.) Only a small portion of that number includes the officially unemployed, the discouraged workers and so forth.
Still, if you take 60 million as a percentage of the entire civilian noninstitutional population, you end up with 23 percent. But only about 25 million are really unemployed, or discouraged from looking for work or marginally attached to the labor force. There’s another 35 million “unemployed” who Trump has not accounted for.
John Williams, an economic gadfly who runs a website called shadowstats, has argued that the rate is 22.9 percent — and has barely budged since 2011 — because, he argues, millions of Americans have simply given up looking for work and thus are not counted in the official statistics. That’s a distinctly minority point of view.
The Pinocchio Test
Trump’s claims on the unemployment rate would not pass muster in an Economics 101 course. While he has apparently cut his estimate of the unemployment rate from 42 percent to 23 percent, his figure is still more than double the most expansive rate published by the government. Thus he once again earns Four Pinocchios.
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