Even as many Americans continue to experience a very slow recovery from the Great Recession, the official unemployment rate has dropped below 5 percent, leading some to credit presidential policies for that positive sign. In response, some critics of President Obama have taken to social media to suggest that the official unemployment numbers are “lies,” part of an intentional conspiracy to hide the real state of the economy.
Their argument is based on the claim that the unemployment figures don’t count people who have given up looking for work or who are working under the table. The critics claim that those numbers, which no one is talking about, have risen and should be included in the unemployment rate.
These critics are correct to point to an increase in the number of people not in the labor force or engaged in part-time or unreported work. That increase may well be related to the poor policy choices of the last seven years. But the numbers aren’t lies, the decrease in the number of people seeking work isn’t a secret, and there is no conspiracy to boost the current administration’s record. The way these data are reported reflects how economists have measured unemployment for decades.
Labor Force Ins and Outs
To understand what’s going on, we need to clarify some basic definitions. The first distinction economists make is whether a person is in or out of the labor force. Being “in” the labor force means that you are interested in paid employment and are actively looking for work or have a job. So, for example, stay-at-home parents and retired people are not in the labor force.
We define unemployed as those people who are in the labor force but not currently employed. That is, you are unemployed only if you do not have a job and are actively looking for one. (The Bureau of Labor Statistics has some specific criteria to determine “actively looking” that need not concern us here.)</p…