Official Unemployment Rate Understates the Situation

by Meteor Blades

Fri Dec 05, 2008 at 09:34:58 PM PST

Back in 1994, the U.S. Bureau of Labor Statistics changed how it gauged unemployment, choosing to exclude "discouraged workers." That means people available and eager to work but who, after a year of looking, have given up because they cannot find a job. The Clinton administration just chopped these discouraged workers out of the most commonly reported statistic on unemployment.

The figure now used - the official rate (which today clocked in at 6.7%) - is called U3 in BLS jargon. As you can see from this table, it's labeled "Total unemployed, as a percent of the civilian labor force." But, as you can also see from the table, there are other, broader measures that rarely get reported in the megamedia, although The Wall Street Journal did include one of these in paragraph 16 of Market Watch today:

An alternative gauge of unemployment -- which includes discouraged workers and those whose hours have been cut back to part-time -- rose to 12.5% from 11.8%. The number of workers forced to work part-time rose by 621,000 to 7.3 million.

That particular measure is labeled U6, which the BLS categorizes as "Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers."