POVERTY LINE

Calculation of jobless rate for Toledo area masks scope of crisis

Area rate would soar with alternative count

William Erb III sits with members of his East Toledo household Billy Erb, 17, Ashley Erb, 16, Stacy Erb holding granddaughter Sierra Kramer, and Christine Brooks, 19.

The Blade/Lori King
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William Erb III sits with members of his East Toledo household Billy Erb, 17, Ashley Erb, 16, Stacy Erb holding granddaughter Sierra Kramer, and Christine Brooks, 19.

William Erb III is unemployed.

His wife and kids knows he's unemployed. His former employer knows he's unemployed. Even the scores of companies and temp agencies to which he's sent in the last 15 months know he's unemployed.

In fact, everybody seems to count the 39-year-old East Toledoan as unemployed except the people who count the unemployed.

To them, Mr. Erb's exhaustion of unemployment benefits in July and his inability to find another job make Mr. Erb a "discouraged worker."

And that means Mr. Erb, like thousands of others in northwest Ohio and southeast Michigan, isn't included in the government's official monthly unemployment rate.

But if he and others who can't find jobs or are underemployed were counted, the latest jobless rate for Lucas County could be 24 percent and for Toledo 26 percent, instead of the 13.3 percent and 14.3 percent figures for January reported by state officials.

The higher number reflects the addition to the official rates at the same proportion that is estimated nationally by U.S. Labor Department.

POVERTY LINE: Unraveling the safety net

"These are really ugly numbers that we're seeing for the state of Michigan and for areas like Toledo that have a lot of auto manufacturing with them," said Guhan Venkatu, a senior policy analyst with the Federal Reserve Bank of Cleveland.

"But in some sense, it should feel to us a little bit like the early 1980s. For those of us in this part of the country, I think it feels like that."

Even though it seems dire that perhaps as many as one of every four people in Lucas County who wants to work can't find a full-time job, the picture is nowhere nearly as bad as it was in the Great Depression.

Unemployment nationally peaked at 24.9 percent in 1932, according to federal government records. Accurate figures weren't kept on a local level, but in the industry-heavy and auto-reliant Toledo, some estimated 80 percent of those who worked in local factories at that time were out of work.

Current formulas

Employment and unemployment figures today are tabulated in different ways by the Labor Department. In general, however, economists and the public have become accustomed to seeing the official jobless rates, known as the U3 figure. Those are announced for national, state, and local levels each month.

Those numbers are derived from monthly surveys of about 60,000 households nationwide, asking who's working and who's not. But people surveyed who have quit looking for a job or who can find only part-time work are excluded. In other words, they don't count.

Separately, the government estimates not only the officially unemployed but also those who have quit looking or who want to have full-time jobs but can find only part-time work.

That overall rate, which is known as a U6 figure and receives little public attention each month, is estimated only nationally, not locally, mainly because the survey sample is too small locally to measure it accurately, state officials and economists said.

Issue of consistency

Asked why the government doesn't promote the U6 rate, which is more on par with jobless rates reported by some other countries, Labor Department staff economist Benjamin Collins said the rate has been tabulated for only 15 years, so the U3 rate is preferred as providing more consistency through the decades.

Canada and much of Europe do include "discouraged workers" and the underemployed in their reported rates, but each country differs on what constitutes unemployment and who makes up the labor force.

Some contend that the U.S. government may prefer the lower U3 figure to show that unemployment is not as high.

In a paper, economist Helen Lachs Ginsberg of the City University of New York said, "Until we recognize the extent of unemployment and low earnings, we will not develop the programs and policies to guarantee living-wage jobs for all Americans."

Nationally, the official jobless rate was 4.9 percent in January, 2008, but the overall unemployment rate was 9 percent, the Labor Department said.

That produced a 4.1 percentage point difference. By December, the official rate was 7.2 percent, but the overall rate was 13.5 percent, or a 6.3 percentage point difference.

An exact science

Applying those rates to the Lucas County and Toledo official unemployment rates is how the estimate was derived that nearly one out of every four adults is considered unemployed. Some labor market specialists and economists, however, question the accuracy of such local estimates.

"We have seen an increase in new applicants, people that have never been in our system before," Deb Ortiz, executive director of Lucas County Job and Family Services, said.

The employees in her office, she said, are starting to see their friends and family show up at the county door looking for assistance, and a recent internal study showed that one in every six residents in Lucas County is receiving some type of government aid. "It's a mess out there for people," Ms. Ortiz said.

Measuring unemployment, said the Fed's Mr. Venkatu, is an inexact science. The methodology, for example, doesn't take into account such everyday things as people moving elsewhere to find work.

Brian Baker, assistant labor market bureau chief at the Ohio Department of Job and Family Services, said inferring national trends locally to determine "real" unemployment is faulty. The monthly household survey in the state includes about 2,500 families, so the sample size on a local level would be too small to provide meaningful results, he said.

The human toll

The sour local unemployment picture is meaningful to Octavia Babney, a Toledoan who took a buyout from what was then DaimlerChrysler Corp. in May, 2007. She didn't qualify for unemployment benefits initially, but the 33-year-old wasn't worried because she would "just find another job" that paid close to $30 an hour.

It didn't work out that way. Now, the single mother of four is a student at Owens Community College trying to get her life "back on course" by studying hospitality management. Still, she sees the economic carnage around her.

"When I have to go to [the Job and Family Services office] to do things pertaining to my case, the line is unbelievable with the amount of people seeking assistance," Ms. Babney said.

"It was hard for me to go back to [Job and Family Services office] after making almost $30 an hour," she said. "The transition is very, very hard because your dignity is on the line. I'm not used to being dependent on other people, but I knew that I had to do what was best for the livelihood of my children. I had to make a decision to apply for some assistance."

Mr. Erb, the "discouraged worker" from Toledo, has applied for work at every temporary job agency in town, said his wife, Stacy.

"He wants to do anything, it doesn't matter what it is, and there's nothing," she said.

The couple, with five children and a grandchild whom they care for in their East Toledo home, is living on government assistance for the first time.

Nationally, the unemployment rate among married men hit 5 percent in January, a rate that was much higher in the deep recession of the early 1980s. Calculating the jobless rate among married men was considered more critical more than four decades ago when the primary breadwinner in most families was the husband.

Cost of assistance

Ohio last year paid out nearly $1.6 billion in unemployment compensation to 855,000 people, including almost $86 million in Lucas County to 58,000 people, state records show. Throughout the year, nearly 4,800 people exhausted their jobless benefits. The maximum weekly benefit was recently increased $25 a week to $503 for those with three or more dependants, and the length of time someone can qualify for unemployment benefits was increased last year from 26 weeks to as long as 59 weeks, depending on individual circumstances.

In January, the most recent month for which records are available, state records show 29,100 people unemployed in Lucas County and 20,200 in Toledo. Jobless benefits paid totaled more than $12.5 million in Lucas County. An additional 518 people that month exhausted their eligibility for unemployment compensation, state officials said.

"The real unemployment rate is always an estimate," explained George Mokrzan, chief economist at Huntington Bancshares Inc., which owns Huntington Bank.

"Sometimes, even the official unemployment rates are hard to pin down. But if the official recorded unemployment rate is [as high as Lucas County's], then I think one can assume that there is a large element of discouraged workers" who aren't being counted.

Economist Ken Mayland of ClearView Economics in Cleveland regularly studies Toledo's economy and delivers economic forecasts to local business groups on the area's long-term economic outlook. Northwest Ohio's heavy industrialization, he said, can exacerbate economic downturns and magnify their intensity.

"There may be reasons why somebody is [a 'discouraged worker'] someplace else but is totally unemployed in Toledo," he said. That could mean, he said, that the number of Toledo-area people not counted in the official jobless rate may be smaller than the national proportion.

Mr. Mokrzan said, "I know Toledo got hit very quickly and very hard by this whole weakening of the economy. But I'm still predicting positive GDP growth in second half of this year and gaining steam in the economy next year."

Contact Larry P. Vellequette at:

lvellequette@theblade.com

or 419-724-6091.