Gallup CEO criticizes measurement of unemployment in the US

The CEO of Gallup says the current unemployment rate is “a Big Lie” because of how it is calculated:

None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job — if you are so hopelessly out of work that you’ve stopped looking over the past four weeks — the Department of Labor doesn’t count you as unemployed. That’s right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news — currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren’t throwing parties to toast “falling” unemployment.There’s another reason why the official rate is misleading. Say you’re an out-of-work engineer or healthcare worker or construction worker or retail manager: If you perform a minimum of one hour of work in a week and are paid at least $20 — maybe someone pays you to mow their lawn — you’re not officially counted as unemployed in the much-reported 5.6%. Few Americans know this.

Yet another figure of importance that doesn’t get much press: those working part time but wanting full-time work. If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find — in other words, you are severely underemployed — the government doesn’t count you in the 5.6%. Few Americans know this…

Gallup defines a good job as 30+ hours per week for an organization that provides a regular paycheck. Right now, the U.S. is delivering at a staggeringly low rate of 44%, which is the number of full-time jobs as a percent of the adult population, 18 years and older. We need that to be 50% and a bare minimum of 10 million new, good jobs to replenish America’s middle class.

How an official statistic is measured may seem mundane but it can be quite consequential, as is noted here. What exactly does it take to get a government agency to measure and report data differently?

This critique may make some interesting political bedfellows. Conservatives might jump on this in order to show that the current administration hasn’t made the kind of economic progress they claim. Liberals might also like this because it suggests a lot of Americans still aren’t doing well even as big corporations and Wall Street seem to have profited. Neither political party really wants to take on Wall Street so they might support these numbers so stocks keep moving up.

US unemployment figures distorted by lack of response, repeated takings of the survey

Two new studies suggest unemployment figures are pushed downward by the data collection process:

The first report, published by the National Bureau of Economic Research, found that the unemployment number released by the government suffers from a problem faced by other pollsters: Lack of response. This problem dates back to a 1994 redesign of the survey when it went from paper-based to computer-based, although neither the researchers nor anyone else has been able to offer a reason for why the redesign has affected the numbers.

What the researchers found was that, for whatever reason, unemployed workers, who are surveyed multiple times are most likely to respond to the survey when they are first given it and ignore the survey later on.

The report notes, “It is possible that unemployed respondents who have already been interviewed are more likely to change their responses to the labor force question, for example, if they want to minimize the length of the interview (now that they know the interview questions) or because they don’t want to admit that they are still unemployed.”

This ends up inaccurately weighting the later responses and skewing the unemployment rate downward. It also seems to have increased the number of people who once would have been designated as officially unemployed but today are labeled as out of the labor force, which means they are neither working nor looking for work.

And the second study suggests some of this data could be collected via Twitter by looking for key phrases.

This generally highlights the issue of survey fatigue where respondents are less likely to respond and completely fill out a survey. This hampers important data collection efforts across a wide range of fields. Given the enormity of the unemployment figures for American politics and economic life, this is a data problem worth solving.

A side thought: instead of searching Twitter for key words, why not deliver survey instruments like this through Twitter or smartphones? The surveys would have to be relatively short but they could have the advantage of seeming less time-consuming and could get better data.

McArdle: real 21st century problem is providing meaningful jobs for all

Megan McArdle considers the recent rioting in Sweden and suggests developed nations have a long-term problem of finding meaningful jobs for all:

In too many places, for too many people, the modern industrialized democracies are not working. People can live, but they are cut off from the broader society. And the number of these people seems to be increasing. It’s too hard for many people to find a decent job. And taking from the rich to buy them health care and day care and subsidized housing does not repair the hole this leaves in their lives.

It looks to me as if the great task of the next few decades will be to find ways to employ all the people on the margins productively, and with dignity. But this is not, mostly, the question that most public policy debates are engaged in addressing. That question is hard, and no one has a good answer, so instead we debate technical questions about stimulus multipliers and minimum wages, and have the occasional knock down, drag out fight about who has a moral right to how much cash. There’s nothing wrong with those debates, and I myself have been a spirited participant. But the harder questions have much more important answers.

Interesting analysis. Simply providing a safety net may not be enough moving forward. Expectations have changed, both for those receiving government or private aid and those providing the aid. People expect to have an opportunity to make decent money as well as pursue something that interests them.

It boils down to this: what happens if you have developed societies with relatively high unemployment, particularly for disadvantages groups, for decades with little change?

h/t Instapundit

More companies hiring through internal referrals, online applications carry a stigma

This might help explain why the ranks of long-term unemployed have risen: more companies are finding new employees through referrals from current employees.

The trend, experts say, has been amplified since the end of the recession by a tight job market and by employee networks on LinkedIn and Facebook, which can help employers find candidates more quickly and bypass reams of applications from job search sites like Monster.com.

Some, like Ernst & Young, the accounting firm, have set ambitious internal goals to increase the proportion of hirings that come from internal referrals. As a result, employee recommendations now account for 45 percent of nonentry-level placements at the firm, up from 28 percent in 2010…

The company’s goal is 50 percent. Others, such as Deloitte and Enterprise Rent-A-Car, have begun offering prizes like iPads and large-screen TVs in addition to traditional cash incentives for employees who refer new hires.

This sounds like a sort of Granovetter social network job hunt run amok: companies are looking for ways to minimize bad hires but in doing so, they are relying more and more on their current employees which freezes out people outside these social networks. But, it also suggests a job hunting strategy beyond Internet sites: people looking for work should look to impress their contacts who are currently working. This could be helpful to a lot of job searchers as it would cut down on online applications, cover letters, and the “black hole” (as it is called in the article) where applicants get very little feedback.

Here is a little bit about the advantages of companies hiring referred employees:

Referral programs carry important benefits for big companies. Besides avoiding hefty payouts to recruiters, referred employees are 15 percent less likely to quit, according to Giorgio Topa, one of the authors of the Federal Reserve Bank of New York study.

Social networks improve business efficiency…but might also leave certain people out in the cold.

The differences by race in using social networks to find a job

Unemployment rates are quite different for whites and blacks. Social networks may be the reason why:

But this stubborn fact remains: The African-American jobless rate is about twice that of whites, a disparity that has barely budged since the government began tracking the data in 1972. In last week’s jobs report, the black unemployment rate was 13.2 percent, while the white rate stood at 6.8 percent.

Discrimination has long been seen as the primary reason for this disparity, which is evident among workers from engineers to laborers. But fresh research has led scholars to conclude that African-Americans also suffer in the labor market from having weaker social networks than other groups.

Having friends and relatives who can introduce you to bosses or tell you about ripe opportunities has proved to be one of the most critical factors in getting work. Such connections can also help people hold on to their jobs, researchers say.

“It is surprising to many people how important job networks are to finding work,” said Deirdre Royster, a New York University sociologist. “The information they provide help people make a good first impression, get through screening and get hired.”

Considering sociologist Mark Granovetter’s oft-cited piece on how weak ties help people find jobs, perhaps this shouldn’t be too surprising. Social capital can go a long way toward accessing opportunities in society. Also, Royster’s book Race and the Invisible Hand is an interesting look at how this played out in one Baltimore vocational high school as faculty members tended to give white students access to their social networks while not giving the same privileges to black students.

Creative class fared better in economic crisis than working and service classes

Richard Florida discusses how the creative class weathered the economic crisis better than blue-collar workers:

The crisis hit hardest at blue-collar workers, while creative class workers and metros with higher shares of creative class jobs fared considerably better. The unemployment rate for creative class workers, which was 1.9 percent in 2006 before the crisis, increased to just 4.1 percent in the years following the recession’s official end — an increase of 2.2 percentage points. The unemployment rate for workers in blue-collar jobs increased from from 6.5 percent before the onset of crisis to 14.6 percent at its end, more than three times higher than that for creative class workers and a jump of more than 8 percentage points. The unemployment rate for workers in routine service jobs increased from 5 percent to 9.3 percent at its end, more than double that for creative class workers a 4.3 percent jump…

Even after controlling for all those things, the analysis found that having a creative class job dramatically reduced a person’s chance of being unemployed over the course of the crisis. All others things being equal, we found that having a creative class occupation reduced an individual’s probability of being unemployed by 2.0 percentage points between 2006 and 2011. Having a creative class job had a bigger effect on the probability of being unemployed than holding a college diploma and about the same effect as having an advanced degree…

The study also found that while unemployment rates were lower in metros with higher shares of creative class jobs, the biggest benefit for creative class workers came in regions with lower shares of creative class jobs. The impact of having a creative occupation on the likelihood of being unemployed, the study found, was slightly stronger in metropolitan areas with lower shares of creative workers…

These results, along with our findings related to the other major occupational groups, are indicative of a structural change taking place in the U.S. economy. This shift is characterized by high — and growing — unemployment in Working Class occupations, whereas the relative position of creative workers improved in the years following the recession.

These final sentences are key: the economic crisis exposed some of the larger structural issues in the American and global economy. The creative class, those with education, social status, and access to the white-collar and high-tech jobs often found in certain metropolitan areas that are producing a lot of wealth, did better in the economic crises. It didn’t mean that no creative class jobs were lost but relatively fewer jobs were lost. On the other hand, more working-class jobs were lost. On top of this, the working and service class didn’t have the same resources to weather the economic storm. When the value of investments, such as housing values and retirement plans, shrunk and jobs dried up, there wasn’t much to fall back on.

This situation is not likely to be fixed quickly. For example, it takes time to get education and only roughly a third of American adults have a college degree. It also takes time for a broader economy to shift away from a service and consumption oriented economy to one that creates more high-paying, information-age jobs.

Of malls, Mormons, mammon, and Mitt

A long article in Bloomberg Businessweek on “How the Mormons Make Money” discusses City Creek Center, a $2 billion “megamall” development that opened in March 2012 “directly across the street from the church’s iconic neo-Gothic temple in Salt Lake City”:

The mall includes a retractable glass roof, 5,000 underground parking spots, and nearly 100 stores and restaurants, ranging from Tiffany’s (TIF) to Forever 21. Walkways link the open-air emporium with the church’s perfectly manicured headquarters on Temple Square. Macy’s (M) is a stone’s throw from the offices of the church’s president, Thomas S. Monson, whom Mormons believe to be a living prophet.

On the morning of its grand opening, thousands of shoppers thronged downtown Salt Lake, eager to elbow their way into the stores. The national anthem played, and Henry B. Eyring, one of Monson’s top counselors, told the crowds, “Everything that we see around us is evidence of the long-standing commitment of the Church of Jesus Christ of Latter-day Saints to Salt Lake City.” When it came time to cut the mall’s flouncy pink ribbon [press release here], Monson, flanked by Utah dignitaries, cheered, “One, two, three—let’s go shopping!”

Watching a religious leader celebrate a mall may seem surreal, but City Creek reflects the spirit of enterprise that animates modern-day Mormonism.

A few thoughts and questions:

1.  A new, $2 billion retail development seems quite aggressive given the current business climate.  Then again, Utah seems to be faring much better than the rest of the U.S. economically.  The state averaged a 6.7% unemployment rate during 2011, 11th out of 50 states (+DC), according to the Bureau of Labor Statistics (BLS).  More specifically, Salt Lake City’s 2011 rate was even lower at 6.5%, putting it at 52 out of 372 major metropolitan areas.  (If you’d like to see Utah’s unemployment rate over time and/or compare it with other state(s), Google has a wonderful interface for interacting with the BLS’ public data here.)

2.  City Creek Center (official webpage here) seems to be neither a traditional mall nor a “lifestyle center“.  Rather, it sprung fully formed within its urban environment (which no doubt contributed to its multi-billion dollar cost) as a rebuilding of Main Street rather than a “Main Streetification”.  If successful, could it usher in a new era of high-dollar, high-stakes urban retail (re)development?  Or does City Creek Center’s strong ties to LDS businesses constitute circumstances so special that they cannot be duplicated elsewhere?

3.  The Bloomberg article seems to connect City Creek Center to Mitt Romney, stating,

It’s perhaps unsurprising that Mormonism, an indigenous American religion, would also adopt the country’s secular faith in money. What is remarkable is how varied the church’s business interests are and that so little is known about its financial interests. Although a former Mormon bishop is about to receive the Republican Party’s presidential nomination, and despite a recent public-relations campaign aimed at combating the perception that it is “secretive,” the LDS Church remains tight-lipped about its holdings. It offers little financial transparency even to its members, who are required to tithe 10 percent of their income to gain access to Mormon temples.

The unstated implication seems to be that Romney’s savvy and secrecy with his own finances is somehow related to the LDS Church’s savvy secrecy with theirs.  Is this a fair conclusion to draw?  Is Bloomberg suggesting that there is something inherent within Mormonism that mandates this particular way of doing business?