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Flash Report - Time for the Real Unemployment Calculation Act


Location: Washington, DC

By Representative Duncan Hunter

Any time the federal government presents a new statistic or report, the American people are right to assume they are receiving the most accurate and reliable information. More importantly, they expect the truth.

In the case of the American economy, multiple indicators are available to gauge condition and performance. While some indicators are more telling than others, each reveals a certain fundamental fact about the economy.

For instance, there's no escaping the fact that the U.S. is more than $15 trillion in debt. This provides no comfort, but the reality that debt levels are consuming more and more of the economy each year has prompted record-level spending cuts and continues to amplify calls for more aggressive budget reforms.

It's also a fact that the U.S. trade deficit with China stands at an alarming $295 billion. Not only does this demonstrate the sizeable imbalance of the U.S.-China trade relationship, it also signals that American manufacturing remains in a state of decline and that sustainable recovery hinges on restoring an industrial base that has ceded considerable ground to foreign competitors.

And there is no disputing that just weeks ago, when Japan lowered its corporate tax rate, the U.S. effective corporate tax rate of 39.2 percent became the highest among developed countries. The appropriate course of action is evident: reduce rates and create a tax system that makes it worthwhile for businesses to invest in the American economy.

Accumulated debt, lopsided trade deficits and a costly and inefficient tax code are nothing to celebrate. But the figures attached to each serve a valuable purpose. In effect, each is a call to action based on inarguable realities facing the economy.

Another leading indicator--the national unemployment rate--is not as direct or transparent.

Each month, the Bureau of Labor Statistics (BLS) calculates and reports data on unemployment. Unlike the national debt, the trade deficit or even existing tax rates, the monthly jobless figure that is routinely cited by the news media and often touted by politicians of both stripes significantly under-represents the true unemployment situation.

In its monthly report, BLS calculates a total of six unemployment figures, U-1 to U-6, but only the U-3 rate, now at 8.2 percent, is reported as the "official" rate. Who is not included in the U-3 rate? Americans who are considered too discouraged and who have given up looking for work. Factor in these individuals, and the U-3 rate of 8.2 percent for the month of March increases to 9.6 percent. That's quite a difference. Some estimates suggest as many as 2.6 million unemployed Americans are overlooked by the U-3 statistic.

Federal law only requires that BLS complete a monthly unemployment report. Within that context, there are no specific requirements for BLS to follow. Indeed, the official U-3 rate does a decent job of capturing the number of Americans it specifically aims to count. The problem is that it is not the best indicator of the national unemployment rate and in turn misleads taxpayers, policy makers and others on the real condition of the American economy. And in order to effectively address an issue of such importance, it's necessary to know the full extent of the problem.

To add clarity to this process, I recently introduced H.R. 4128, the Real Unemployment Calculation Act, in the U.S. House of Representatives. This one-page bill states that for purposes of the federal government, the official unemployment rate that is reported each month must take into account people who have given up looking for work--as currently represented by the U-5 statistic.

No matter who is in the White House or what political party controls Congress, the American people deserve the truth. The unemployment figure might be only one of several economic indicators, but its importance cannot be overstated.

With this and other information used to guide policy and inform Americans of the challenges ahead, the most accurate and reliable data should be expected and always delivered.

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