Is 8 to 9 percent unemployment the new ‘norm?’

Published 9:00 am Saturday, July 30, 2011

by Bob Holt

A major factor in our current weak economy is our exceptionally high unemployment rate.

As of early July, our last U.S.-reported unemployment rate was 9.1 percent. That number translates to about 14 million Americans out of work.

It is a sad fact that this 9.1 unemployment rate, while considered to be the “official” rate of unemployment, is only a part of the story. Most economists feel the real number is almost twice that high.

The “actual” number of unemployment currently is approximately 24 million workers. How can these numbers be so far apart?

The “official” unemployment rate is determined by considering those unemployed workers who are receiving unemployment compensation payments through their respective states. Unemployment compensation payments come from a combination of federal and state funding and are administered by the state.

Most states have exhausted their unemployment compensation funds and are borrowing their share from the federal government, which, in turn, is borrowing the money for these payments.

Most recipients of unemployment compensation funds have received them for almost two years. Once they have received the maximum eligible payments, they are no longer counted in the official unemployment figure.

Thus, a person who has received the maximum unemployment compensation and who is still unemployed is no longer counted officially as unemployed.

Unfortunately, there are many workers in the United States who are paid “under the table,” meaning they are paid in cash with no payroll tax withholdings for federal and state taxes as well as Social Security and Medicare deductions.

These workers are not eligible for unemployment compensation because there is no record of their employment, and their employer has not paid into the unemployment compensation pool to provide funds for this purpose.

The term “underemployed” represents those Americans working, but who have jobs either below their level of expertise or who are working part time when they want full-time employment. These citizens are not calculated in any unemployment figures.

Bottom line — true unemployment in the United States is composed of those receiving unemployment compensation payments, those who are no longer eligible for payments since they reached their maximum eligibility and those unemployed who were paid outside of normal payroll processes.

Economists believe our true unemployment is around 16 percent, and that the official unemployment rate of 8 to 9 percent will be around for a few years.

BOB HOLT is a Franklin native and professor of management and real estate at Southwestern Community College in Sylva, N.C. He can be reached at