Counting the Invisible Unemployed in Washington State

The invisible unemployed are workers who desperately need a job, but have given up looking for work and/or have been unemployed for so long that they have lost their unemployment benefits. They therefore no longer count as part of the “official workforce.” The failure to count these invisible unemployed workers in the unemployment rate leads to the absurd claim that the unemployment rate is falling to 9% - when in fact it rising rapidly and is currently above 27%.

In a previous report, “Counting the Invisible Unemployed in the US”, I used national Bureau of Labor Statistics data to calculate that the actual national unemployment rate was three times greater than the official unemployment rate (27% versus an official rate of only 9%). This was due to the millions of “invisible” unemployed adults, including huge numbers of young unemployed adults, who were simply not being counted by the federal government.

In this report, we will examine the Invisible Unemployed here in Washington State. While the work force has been reported to be only 3.5 million, we will show that the actual work force is now over 4 million and is under reported by at least 660,000 – a sharp rise of at least 160,000 in just the past year. The number of unemployed workers is currently reported to be only 320,000. However, with employment under 3 million, and a total workforce of more than 4 million, the real number of unemployed workers is more than one million – meaning that there are at least 680,000 “invisible” unemployed workers in Washington State. Thus, while the official unemployment rate is reported to be only 9.2 %, the actual unemployment rate is greater than 27%. Far from declining, if one counts the 60,000 invisible young adults entering the work force each year - but being unable to find jobs - the actual unemployment rate is increasing.

October 12, 2011 Update

Since I first wrote this report on June 30, 2011, there have been two more Washington State monthly employment reports. Both show the number of invisible unemployed rising dramatically. The first report on July 20, 2011, for June 2011 employment in Washington State, showed that the “official workforce” continues to fall (a one month decline of about10,000 workers). In fact, in June, the workforce actually grew by at least 5,000 workers. Therefore the number of invisible unemployed rose in June by 15,000 workers.

Reported Labor Force: http://www.workforceexplorer.com/article.asp?ARTICLEID=10581

The second report, on August 17, 2011 for July 2011 employment shows that the official labor force fell by 17,000 workers from June to July 2011. In fact, as we will show below, the workforce actually rose by 5,000 workers – for a dramatically increasing the number of invisible unemployed of 22,000 during the month of July. The total increase in the invisible unemployed since my June 30, 2011 report has been at least 40,000 workers – and this dire situation is getting worse every month!

Look closely at the above report. Note that since July 2010, the official workforce has fallen sharply from 3.54 million to 3.46 million – a decline of 80,000 workers in a single year. In fact, the number of workers actually increased by about 60,000 during the past year. Thus, for the year, the number of invisible unemployed rose by 140,000 – bringing the total number of invisible unemployed in Washington State to more than 660,000. The total number of unemployed workers in Washington State has risen to more than one million.  The real unemployment rate is now more than 28%. The charts and graphs below have been updated to reflect our State’s ever worsening unemployment crisis.

Determining the Size of the Work Force in Washington State

There are at least two areas where State and federal reporting of unemployment are not accurate. The first is the size of the work force and the second is the number of unemployed workers – both of which are greatly underestimated. First we will look at how the size of our State’s population and work force have changed during the past 10 years in order to more accurately determine the size of the current work force in Washington State:

The Relationship between Population Growth and Work Force Growth

The above table shows that our State’s population has been growing at an average rate of 80,000 per year for the past 11 years, resulting in a net increase of more than 800,000 people – which is why we got a new Congressional District. This number of 80,000 per year is also similar to the “Grade Cohort” in our public schools. We have about one million children in our schools which divided over 13 Grades (including Kindergarten) comes to 77,000 students per Grade which graduate from our public schools every year. About half of these go on to college (and enter the work force 4 years later). The end result is that about 77,000 young adults enter our workforce every year. A small percentage of these, or about 10, 000, do not enter our work force, either because they became full time parents or because they entered the military or work on farms. Another 7,000 are balanced out by retirements. This leaves an average actual Work Force increase of 60,000 per year.

There has always been a significant “under-reporting” of the actual work force – likely due to construction jobs or other “under-the-table jobs which may be done on a “cash” basis and not reported to the State or federal governments. For example, in 2001, the State population was nearly 6 million. But the claimed work force was only 3 million – meaning only half the population was reported to be in the work force.

Studies of “participation” in the work force indicate that at least 60% of people are in the work force –especially with the rise of “two-wage-earner” families in the past 20 years. So it is likely that the actual work force in 2001 was about (60% x 6 million = 3.6 million) – or at least 400,000 higher than the reported work force in 2001. What we are interested in determining is how this number has changed SINCE 2001.

The only numbers on the above table we can have any degree of confidence is accurate is the total population – which is why all the other numbers should be examined in relationship to the rise in population. We can be fairly certain that our State has a population of about 6.8 million. Excluding 1 million school children, another half million children not yet in school, 800,000 retired citizens, 200,000 full time care givers, and 100,000 in the military or on farms, this leaves a work force of about 4 million.

Of this 4 million, less than 3 million have jobs – leaving more than one million workers unemployed.

But only 320,000 are reported as unemployed. The remaining 680,000 are the “invisible unemployed.” 

The Invisible Unemployed is the gap between the reported number of workers and the actual number of workers. The above graph makes it clear that this gap has widened dramatically in just the past year. The final number in the above chart is now 3.46 – a dramatic decline in the official workforce of 107,000 in the past year. Meanwhile, the actual workforce grew by 60,000 for a difference of 167,000 in a single year.

How and why did this happen?

For some reason, the under-reporting of unemployed workers has gotten much worse during the current economic recession. For example, in 2010, the population grew by 60,000. Yet the reported work force did not grow at all. Then in 2011, the population grew by 70,000 - but the reported work force actually FELL by 107,000. Such a statistical outlier is simply not possible.

What is far more likely is that in 2010 and in 2011, the actual work force grew by 60,000 each year (via high school and college graduates). But because there were almost no jobs for these young adults, they were never counted as entering the work force. Instead, nearly all of these high school and college graduates joined the ranks of the Invisible Unemployed in our State.

Below is the rate of growth of the invisible unemployed in our State in the past 10 years:

There are now more than 700,000 invisible unemployed workers. Even worse, this number has risen by more than 167,000 in just the past year. In other words, with 70,000 young adults entering the workforce during each of the past two years, almost none of them have been able to find even an entry level job.

Now that we have a better understanding of how the actual workforce has risen while the “official” reported workforce has fallen, we will next take a closer look at how this economic and social disaster has evolved, by adding the invisible unemployed to the reported unemployed to determine the actual unemployment rate:

Determining the Real Unemployment Rate

The following table shows how the real unemployment rate has risen since the beginning of the current Economic Crisis in January 2008.

The real unemployment rate, including 700,000 invisible unemployed workers is now about 29%. Assuming 60,000 new workers enter the market every year, we will need to create 5,000 jobs per month just to stay at this level. So the loss of 1,000 jobs during the month of May 2011 actually resulted in 6,000 more unemployed workers. But because the Bureau of Labor Statistics does not accurately track the growth of the workforce over time, 5,000 of the 6,000 new young adult workers were “invisible unemployed.”

Our unemployment problem is not merely that jobs have fallen from about 3 million to 2.8 million during this Great Recession, a decline of 200,000 jobs, but also that the work force has risen by more than 200,000 in the past 3 years, a rise of 300,000 “invisible” unemployed workers.

The actual number of unemployed workers has always been much greater than the reported number of unemployed workers. However, the difference between the actual and reported number of unemployed workers has risen dramatically in the past year. The actual unemployment rate has also been much greater than the reported unemployment rate. Whereas the current unemployment rate is 9.1%, the actual unemployment rate is over 28%.

Put another way, we have a total population of just under 7 million. Of these about 4 million are in the work force and there are less than 3 million jobs – leaving one million adults without jobs – and the bulk of these are in the ranks of the invisible unemployed. They are invisible because they can not even find their first jobs. This is a crisis of historic proportions and one that demands an immediate job creation program.

Regards, David Spring M. Ed.

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