Report: Discrepancy Between Growing Freelance ‘Phenomena’ and US Unemployment Figures

The U.S. Bureau of Labor Statistics’ released their jobs report for May which tracked the US unemployment rate at 5.4%. According to Susan Houseman, Senior Economist at the Upjohn Institute for Employment, the percentage of American workers that identified as ‘self-employed’ in the Current Population Survey (‘CPS’) has remained steady between 10 and 11%.

Yet according to a 2014 report commissioned by non-profit group Freelancers Union, 34% of the population (roughly 53 million Americans) work on a freelance basis. This raises questions about whether national freelancer data is being accurately tracked to exclude wider implications about the US unemployment numbers.

While taking into account freelancers who identify as full-time workers, the disparity in numbers still suggests there exists an apparent discrepancy between the Bureau of Labor Statistics’ unemployment figures and the recent data released by Freelancers Union.

We approached the press officer for the BLS, Gary Steinberg, who informed us: “There is no category called freelancers in our survey because it’s not an occupation and it’s not an industry. But our survey [Current Employment Statistics] does include every job that’s on a payroll.”

Steinberg admitted, however, that most self-employed workers, more often than not, are not on a payroll. In which case, they will be included in the “household,” or Current Population Survey, he said. This is where it can get tricky. The CPS asks respondents about the job they held in a specific week of the survey month. Freelancers, however, can work anywhere from zero hours to much above average hours in any given week, adding a loophole to the final jobs report.

“I do think it’s a problem that we don’t have a handle on how big this phenomena is”, confirmed Houseman. The BLS release their rolling figures on the US unemployment rate every month yet “it’s impossible to know how many [freelancers] are being miscounted, undercounted or left out entirely”, said Sara Horowtiz, founder of Freelancers Union.

“I can tell you that the rate of self employment has not gone up in the CPS. So the question is, is the CPS not capturing freelancers or are freelancers not identifying as self-employed? Because I can guarantee you- if the self-employment rate has gone up, alarm bells would be sounding and BLS would be out there saying ‘we’ve got to figure out what’s going on’”, said Houseman.

Leading industry analyst Altimeter Group also reported a growing movement in self-employed workers, with the rise of “sites like Etsy removing the barriers for aspiring entrepreneurs.” Altimeter Group cited oDesk figures in a 2013 report that found “72% of workers seek to quit their jobs to be independent and would use online freelancing services as a way to move forward.”

Altimeter Group highlighted financial flexibility as one of the key factors driving the online freelancing shift, with online marketplaces providing workers with “greater financial independence and empowerment.” Both sets of data provided by Freelancers Union and Altimeter Group point to the decline of the traditional 9-5 in the US, and rise of a new independent workforce.

So what does this mean for the general health of the US economy?

“What would matter is if we’re getting inaccurate measures of change in the US workforce, because it means we would think unemployment was much higher than it actually is”, said John Horton, Assistant Professor in the Information Systems Group at NYU, and previously the staff economist at oDesk.

If employment numbers are higher than reported and the economy is growing, this could cause fears of inflation. According to CNBC’s Mark Koba, “the Fed- with a mandate to control inflation- could raise interest rates to slow down an overheating economy.”

This would be cause for alarm, as we know unemployment figures remain a key economic indicator for the Fed when it comes to determining interest rates, and indeed the general health of the US economy. Could ‘missing’ freelancers in jobs reports affect how hard it is to get a home loan or the value of the dollar abroad? Indeed the impact could be felt far beyond the freelance community – by all Americans.