Bernie Nunez is tired of hearing that the job market is better than it looks.

As a freelance photographer from New York, he is one of the thousands of workers in the U.S. currently considered self-employed.

Although Nunez is working -- his photographs can be seen on and in various publications -- he is not working at full potential. What's more, he is forced to pay his own health insurance and take unpaid vacations, all while saving for retirement.

"I've been hearing for a while about the fact that the jobs picture is brighter than statistics because we are all working in our own businesses," he wrote in an email. "Bull!"

For months now, a number of economists have been saying that the payroll data issued by the Labor Department understate the strength in the job market, because they miss the growth in self-employed workers. Indeed, Treasury Secretary John Snow has repeated this claim in interviews with journalists. Take a look at the Labor Department's separately compiled household survey, he says, and the job situation seems a whole lot better.

Since the economic expansion began in December 2001, more than 2 million jobs have been created, according to the government's household survey. In contrast, the payroll survey shows that 718,000 jobs have been shed.

In compiling the household data, the Labor Department calls about 60,000 homes, and it's from this that the unemployment rate is computed. The jobless rate has fallen to 5.6% from 6.3% in June, but partly because thousands of workers have dropped out of the labor force. The government contacts 400,000 businesses to compile the payroll data.

One of the problems with calling people directly is that they're not always going to be honest, and some won't admit to being unemployed. "A friend of mine is no longer employed, but you ask him if he's unemployed and he'll tell you no," Nunez said. "He has a Web site and is a blogger. Does he make a nickel? No. But count him as employed."

Anthony Chan, chief economist at Banc One Investment Advisors, says some people will always be ashamed to admit they're unemployed, so the household survey isn't likely to be any more distorted today than at any other time in the past.

"However, a lot of the people have become self-employed recently because they simply can't find a job," he said. "So you can easily argue that some of those individuals are self-employed for economic reasons."

"No one will argue with the fact that the number of self-employed seems to increase during rough economic times, and that's not a coincidence. It's happening because there aren't too many options."

Nunez said newspapers and wire services used to hire full-time staff photographers, but many companies now hire independent contractors to keep their costs down. And while some freelancers make a good living at this, "the majority are struggling below the poverty line," he said.

"Oh, but they are working, and therefore the jobs picture is better."

The sentiments are echoed by many people in the technology world. Harold Brownstein of Mahwah, N.J., said he has a Ph.D. in electrical engineering and a background in programming. A onetime math teacher and former president of several companies, he is now trying to sell souvenirs to gift shops over the Internet. "Can't even get a job as a clerk," he said.

Another software engineer from New York, who asked not to be identified, said he has been freelancing since he lost his job after Sept. 11, 2001. With one client, though, he made just $25,000 last year, down 75% from what he made three years ago.

"I'm not comparing things to the 'boom' days," he said. "It's worse than even before the dot-com boom. It's the worst job market I've ever seen, going back to the '91 recession."

In the newspaper business, things seem to be just as rough. "Yes, I had an article published in a book," said Diane Petryk-Bloom of Brooklyn. "But it's hard to run your self-esteem engine on that all year."

Smooch S. Reynolds, president and CEO of executive search firm Repovich Reynolds Group and author of the book Be Hunted!,said she has been seeing a higher percentage of underemployed candidates recently. These are people like Nunez, Brownstein and Petryk-Bloom who have part-time, irregular or inadequate employment.

Meanwhile, career-management firm Bernard Haldane Associates said it has found that a growing number of job hunters are willing to accept positions for which they are obviously overqualified.

"People coming from depressed industries, such as the technology sector, are facing the harsh reality that they may never find employment in their field again," said Jerry Weinger, chairman of Bernard Haldane Associates. "For many, it requires switching industries and starting over, with financial pressures often forcing them to take any job just to pay the bills."

Despite talk that the labor market is getting better, Bank of America ( BAC) said it would lay off 13,000 workers as it completes its merger with FleetBoston ( FBF), according to The Wall Street Journal. And with M&A activity ramping up this year, more job cuts could be in the works, even as the economy continues to expand.

On Tuesday, the Federal Reserve downgraded its assessment of the job market, saying that "hiring has lagged." In its last edict, the central bank says that while hiring remains subdued, "other indicators suggest an improvement in the labor market."

To be sure, most economists are expecting the labor market to improve, as productivity declines. The very high productivity rate in the U.S. has been preventing companies from hiring new workers. Overseas outsourcing and a general reluctance to hire after several years of weak economic growth are also cited as culprits.

Chan says he believes about 1.8 million jobs could be created over the next year as the productivity rate declines by 1.5%. Even if that prediction materializes, however, the quality of the jobs being created may not be so inspiring.

While this bodes ill for consumer spending, tax cuts and a possible wave of refinancing this year should prevent the economy from spiraling lower. It remains to be seen whether that will prevent the ouster of President Bush in November.

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