HOLLOW PROMISES

Why America’s impressive 5% unemployment rate feels like a lie for so many

On Apr. 14, Bloomberg News announced that jobless claims in the US have reached their lowest level since 1973. “All other labor market data are telling us that the economy is creating a lot of jobs,” economist Patrick Newport told the outlet. “This is further confirmation that the labor market is strong.”

That same day, thousands of fast food workers, airport workers, home care workers, and adjunct professors took to the streets across the country to protest brutal labor conditions and demand a $15 minimum wage. Most of these workers make far below $15 per hour. Some make as low as $7.25 per hour, the current federal minimum wage. Most lack benefits. Some, like adjunct professors, have contingent, temporary jobs, sometimes consisting of only one poorly paid course per year. Many low-wage employees work two or even three jobs in an attempt to cobble together enough income to cover basic needs.

According to the US Bureau of Labor, all of these workers are considered “employed.” They are viewed as part of the American economy’s success story, a big part of which is our 5% unemployment rate. As president Barack Obama boasted in February: “The United States of America right now has the strongest, most durable economy in the world.”

 Obama’s claims of a strong economy ring hollow for the many thousands of workers who say they cannot make enough to survive. But Obama’s claims of a strong economy ring hollow for the many thousands of workers—in professions ranging from those which require a GED to those which require a PhD—who say they cannot make enough money to survive. And these people, at least, are working. Those who cannot find work at all tell an even grimmer story.

There are three main reasons the vaunted economic recovery still feels false to so many. The first is the labor participation rate, which plunged at the start of the Great Recession and discounts the millions of Americans who have been out of work for six months or more. The second is “the 1099 economy,” a term The New Republic’s David Dayen coined to refer to the soaring number of temps, contractors, freelancers, and other often involuntarily self-employed workers. The third is a surge in low-wage service jobs, coupled with a corresponding decrease in middle-class jobs.

Employment statistics in particular have a habit of eclipsing the real story. As any worker will tell you, it is not the number of jobs that matters most, but what kind of jobs are available, what they pay, and how that pay measures against the cost of living. The 5% unemployment rate, other words, is hiding the devastating story of underemployment, wage loss, and precariousness that defines life for millions of Americans.

 Employment statistics in particular have a habit of eclipsing the real story.  Since 2008, the labor participation rate has fallen from a high of 67.3% in 2000 to 62.6% today. That 62.2% represents a 38-year low, which puts Bloomberg’s claim of a 42-year-low in joblessness in perspective. The jobless number is “low” only because more people are no longer considered to be participating in the workforce.

Some of the lowered participation is voluntary—an increase in students (some flocking to school to escape the job market) and baby boomer retirees. But some is due to the 2.1 million Americans considered the long-term unemployed (workers unemployed after 27 weeks of searching). This number is down from its height of six million in 2010, but in some states, more than 4 out of 10 unemployed workers are still considered long-term unemployed.

The blank spot on the resume of the long-term unemployed is a trap that few can escape. Many move in and out of “non-participation,” according to Federal Reserve analysts, alternating between searching for a job and giving up in desperation. Once Americans stop actively looking for work, they are dropped from the unemployment rolls, even though they might still very much like a job.

Making matters much worse, the government has failed to come up with a plan that adequately supports these people. While long-term unemployment remains high, states are cutting the length of unemployment benefits. In Missouri, for example, benefits only last 13 weeks.

 The blank spot on the resume of the long-term unemployed is a trap that few can escape.  Many of the long-term unemployed are older workers who once had stable middle-class jobs with benefits. Some, like their younger peers, have resorted to participating in the “1099 economy,” willingly or unwillingly. Freelance and contract workers move from low-paying gig to gig in professions like journalism, arts and entertainment, private transportation, and higher education, trying to scrape together enough cash to survive.

The number of Americans working in this capacity grew from 10.1% in 2005 to 15.8% in 2015, according to new research from labor economists Lawrence Katz and Alan Krueger. David Dayen describes their life as stressful and uncertain: “You’re cut off from any safety net that relies on employers. You have an unpaid, part-time job consisting of getting your next job and making sure you get paid for your last job … You have no advocates for you in the workplace, and little bargaining power to improve your lot.”

So far, the government does not seem particularly interested in these details. If you work for a mere hour per week and make $20, you are still considered employed, according to Gallup. And just like that, the marginally employed workers of the 1099 economy, like some of the long-term employed, are omitted from the unemployment statistics.

The problem is compounded by post-recession “job growth” that has been concentrated in low-wage industries—the kind of industries whose labor exploitation has prompted mass protests across the country. Meanwhile, middle-class jobs continue to disappear. 44% of new jobs created between 2008 and 2012 were in low-paid service work, according to a report by the National Employment Law Project. Only 22% of jobs lost at that time fell into this category.

 The problem is compounded by post-recession “job growth” that has been concentrated in low-wage industries. According to the Economic Policy Institute, in New York City, the number of low-wage jobs ($45,000 annually or lower) rose by 191,000 in 2014. Comparatively, the number of middle-class jobs—defined as paying between $49,971 and $71,692 per year—rose by only 3,745. Meanwhile, cost of living continues to soar, with the result that even some homeless people in New York work two low-wage jobs.

Obama’s claims about America’s economic recovery are in part a rejoinder to critiques from Republican presidential candidates who argue he has failed to address our joblessness problem. (This is a theory which conveniently ignores the role of the GOP-lead Congress, of course). As Donald Trump declared in February: “Don’t believe those phony numbers when you hear 4.9 and 5% unemployment. The number’s probably 28, 29, as high as 35. In fact, I even heard recently 42%.” This claim was rated “Pants on Fire” by Politifact, a site which measures truth in campaigns.

To be clear, Trump’s 42% claim is a lie. But for the millions of Americans working low-wage or temporary jobs or suffering from long-term unemployment, it feels like the truth.

Democratic candidates should avoid echoing Obama by declaring the unemployment rate a victory. The unemployment rate is an illusion, a misleading number that, when recited in reassurance, smacks of a lack of understanding and empathy for Americans struggling to gain a foothold in an economy that has undergone a profound and detrimental transformation. Flaunt this statistic at your peril—unless you want a President Trump.

You can follow Sarah on Twitter at @sarahkendzior. We welcome your comments at ideas@qz.com.

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