12E.5.4 How the Government Measures Unemployment
Source of economic data on unemployment is the Current Population Survey and the history behind it
“How the Government Measures Unemployment” by the Bureau of Labor Statistics describes the Current Population Survey (CPS) and how it collects information about employment. The excerpt explains who and how the CPS surveys in the United States to collect the unemployment data. Questions 1. How is data collected on unemployment today? a. Who collects the data? How is the data collected? Who is surveyed about unemployment? What information is collected from those surveyed? 2. Based on how the data is collected today, what are limitations of the unemployment numbers? 3. What is the difference between how data was collected in 1937 (Source 3) and how it is collected today (Source 4)? Why is this important? 4. How does this source help you better understand Source 1?
Students will use this source to see how the federal government has collected data since 1940 and to consider the difference compared to collection methods in Source 3 (prior to 1940). Using the monthly Current Population Survey for 2019, students will analyze how even though the data is collected more frequently and with a wider range of people, there are still limitations. This source, along with Source 3, emphasizes the importance of knowing how data is collected in order to tell the story of the economy. Although employment status was a part of the census from 1880 onward, a more regular accounting of employment was needed. The Great Depression compelled the federal government to seek accurate unemployment information in order to more effectively plan government policy and provide relief. In the 1930s, the Works Progress Administration (WPA; in 1939 renamed the Work Projects Administration) began to collect data on unemployment in local areas through government relief programs. However, many of those who were unemployed did not need relief or did not apply for it, so the WPA launched the Enumerated Check Census in 1937 along with the voluntary census postcard employment status registration. The Enumerated Check Census was the first nationwide attempt using probability sampling, and its results led to the development of the WPA’s monthly survey on unemployment, the Current Population Survey (CPS). Unemployment data has been collected monthly through the CPS since 1940.The Census Bureau took over the CPS in 1942. The key components of this source are who is surveyed, how they are surveyed, and the survey’s limitations. People are surveyed through live interviews for four consecutive months and then a year later to track employment changes. A limitation is that the survey cannot question the entire population, so it is just a sampling. On the other hand, the survey obtains information on more than those who fit the unemployed profile of people who are looking for jobs and have not found one. The data includes people who purposely quit their jobs to find another job, as well as those whose skills no longer match current job requirements. These individuals are classified as being part of frictional unemployment. In addition, individuals may also be unemployed because wages and cost of benefits fail to adjust to reach the equilibrium in the labor market. The resulting unemployment is known as structural unemployment. Economists view the sum of frictional and structural unemployment as the “natural rate” of unemployment, the average level of unemployment in a long span of time. In addition, the survey includes those whose jobs have temporarily ended. They are known as the seasonally unemployed. The survey also accounts for those who are new to the workforce or who are re-entering the workforce after a long absence.
Because unemployment insurance records relate only to people who have applied for such benefits, and since it is impractical to count every unemployed person each month, the government conducts a monthly survey called the Current Population Survey (CPS) to measure the extent of unemployment in the country. The CPS has been conducted in the United States every month since 1940, when it began as a Work Projects Administration program. In 1942, the U.S. Census Bureau took over responsibility for the CPS. The survey has been expanded and modified several times since then. In 1994, for instance, the CPS underwent a major redesign in order to computerize the interview process as well as to obtain more comprehensive and relevant information.
There are about 60,000 eligible households in the sample for this survey. This translates into approximately 110,000 individuals each month, a large sample compared to public opinion surveys, which usually cover fewer than 2,000 people. The CPS sample is selected so as to be representative of the entire population of the United States. In order to select the sample, all of the counties and independent cities in the country first are grouped into approximately 2,000 geographic areas (sampling units). The Census Bureau then designs and selects a sample of about 800 of these geographic areas to represent each state and the District of Columbia. The sample is a state-based design and reflects urban and rural areas, different types of industrial and farming areas, and the major geographic divisions of each state.
The total unemployment figures cover more than the number of people who have lost jobs. They include people who have quit their jobs to look for other employment, workers whose temporary jobs have ended, individuals looking for their first job, and experienced workers looking for jobs after an absence from the labor force (for example, stay-at-home parents who return to the labor force after their children have entered school). Information also is collected for the unemployed on the industry and occupation of the last job they held (if applicable), how long they have been looking for work, their reason for being jobless (for example, did they lose or quit their job), and their job search methods.