This week, we break down the unemployment rate and discuss how it does not give the full, clear picture of the job situation that many politicians might claim that it does.
There are multiple measures of unemployment that the Bureau of Labor Statistics (BLS) releases every month. There are six of these measures, creatively named U-1 through U-6. We are going to focus on U-3, known as the official unemployment rate, and U-6, which gives a more complete picture of the scene.
Investopedia states that U-3, “is most basically as the percentage of the total labor force that is unemployed but actively seeking employment and willing to work.” Let’s break that definition down a bit more. The labor force is the group of ”Americans who have jobs or are seeking a job, are at least 16 years old, are not serving in the military and are not institutionalized.” The second part of the definition of U-3 is just as important as the first. To be counted as “unemployed,” you must be jobless and actively searching for a job.
U-6 includes the “total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”
“Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part-time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.”
So next time you hear a politician talk about the unemployment rate, remember the differences between the number they are talking about, and the real rate of unemployment.