Worse Than We Thought: Unemployment Numbers May be 10-15% Higher than Stated

02/14/2009 05:12 am ET | Updated May 25, 2011

This week we learned the number of unemployed increased by 534,000, bringing the reported number of individuals unemployed to 11.2 million. In 2008 alone the number of unemployed has grew by 2.6 million -- that's nearly 7,123 jobs lost per day over a one-year period. These figures are just short of the 2.75 million jobs lost at the end of World War II.

What is missing from these figures, however, is the number of individuals who are ineligible for unemployment benefits or who are a part of the shadow economy employed as day laborers, service or domestic workers. When these individuals are included, the unemployment rate could be at least 10-15% higher than stated.

Unemployment rates are calculated using payroll and household surveys as well as the number of individuals who apply for unemployment benefits in any given month. While these methods of calculation tell us much, they fail to account for the number of individuals who because of past or present employment status are absent from traditional payrolls. For example, because women are likely to hold part-time jobs ore move in and out of the workforce, only 34% are able to apply for or receive unemployment benefits.

The numbers also fail to consider the number of individuals employed in the shadow economy who have become unemployed as a result of the economic downturn. I am talking about immigrants and others who receive cash payments for services that are not reported to the government. It is estimated that this shadow economy accounts for 337 billion dollars, or 6.2% of the GDP. And while many may disagree with including these individuals in the unemployment figures, failure to do so underestimates the magnitude of the economic crisis as it relates to unemployment and impacts calculations made about how soon we will recover.

The recovery package is projected to save or create two to three million jobs. These jobs are supposed to cut across industries and go a long way toward re-building the country's infrastructure. I am reluctant to bring up the past or the B-word for that matter, but in 2004 President Bush promised to create 2.6 million jobs than in 2003. He did not. By the end of the 2004, the economy only gained a little over 308,000 jobs.

In attempting to stimulate in the economy through job creation, the new Administration should be realistic about the amount of time it will take to put people back to work and what kinds of safety nets need to be put into place to help families before that occurs. It should also be mindful about the types of jobs that will be created and the kinds of wages said jobs will pay. We do not need thousands of jobs paying little above the minimum wage flooding the market with the biggest salaries reserved for project managers or heads of businesses.

In filling in the details of the recovery package, a top priority should also be to ensure that there is equity in terms of the competition and awarding of contracts. In the haste to get legislation passed we must be vigilant about the details and work to ensure that there are systems in place for accountability and oversight.

Obama, I do not envy you or your economic team. Your task is enormous and the climb is steep. I eagerly await your entry into the White House.