GOP Debate: America’s Real Unemployment Rate is 40%

November 11, 2015, 4:47 PM UTC
GOP Presidential Candidates Debate In Milwaukee
MILWAUKEE, WI - NOVEMBER 10: Moderator Maria Bartiromo looks on during the Republican Presidential Debate sponsored by Fox Business and the Wall Street Journal at the Milwaukee Theatre on November 10, 2015 in Milwaukee, Wisconsin. The fourth Republican debate is held in two parts, one main debate for the top eight candidates, and another for four other candidates lower in the current polls. (Photo by Scott Olson/Getty Images)
Photograph by Scott Olson—Getty Images

During Tuesday night’s GOP Debate on Fox Business, moderator Maria Bartiromo put forward a statistic that some in the media found surprising, saying that “almost 40% of Americans are without a job and are not looking.”

Media Matters called the statistic a “myth,” arguing that the official unemployment rate of 5% is the best gauge of the health of the labor market. But as I wrote in September, after Donald Trump made a similar claim, there is validity to the 40% statistic. In fact, if you look at the broadest measure of unemployment, the employment-population ratio, which measures the ratio of people with a job to the overall population of people over the age of 16, the unemployment rate is just over 40%.

The thing is, this statistic does not mean that the economy is in particularly bad shape right now. Here’s what I wrote back September:

As you can see from the above chart, 40% of the 16-and-over population not having a job is nothing new in America. Trump’s campaign slogan, Make America Great Again, presumably refers to his hope of returning America to it’s post-war glory, when the U.S. economy accounted for a much larger share of global GDP than it does today. But that was a time when a lower percentage of Americans of working age had a job.

When you study the statistics carefully, you find that the employment-population ratio has much more to do with social factors than the strength of the economy. As it became socially acceptable (and for middle class families economically necessary) for women to enter the workforce in large numbers, the ratio rose. As the country aged and a greater share of workers entered retirement years, the ratio fell.

It’s also true that the Great Recession has affected the labor market in ways that are still being felt. Long-term unemployment skyrocketed and has yet to fall back to pre-crisis levels, and that fact shows up in the employment-population ratio. But to claim that the unemployment rate is a statistic that, as Trump said, “was made up by the politicians for the politicians . . . so they could look good,” has no basis in fact.

The fact of the matter is, no single statistic can give us a full picture of the health of the economy. Just because the official unemployment rate is down to 5%, that doesn’t mean that the economy is as healthy as the last time it was at this level. That’s in part because there is a greater share of workers today who are working part time but want full time work than in the past. There are also a greater number of folks who have given up looking for work because they believe there isn’t anything out there for them. And lastly, as the nation ages the share of retired workers has increased.

In other words, be careful when politicians (or journalists) come bearing statistics that offer a simple story. There’s usually more going on than meets the eye.

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