As the unemployment rate has decreased during the last few years, from its peak of 10% in October 2009 to 5.9% in September 2014, it\’s become common to hear a cynical reaction along the following lines: \”Sure, the official unemployment rate was 5.9% in September 2014, but when you take into account those who have become too discouraged too for a job and those with a part-time job who would prefer full-time work, the real unemployment rate is twice as high at 11.8%.\”
This comment is usually made in a \”gotcha\” tone, with a eyebrow-lifting emphasis on official and real, as if those nefarious government economic statisticians are trying to pull a fast one on the unsuspecting public. But color me unsurprised that if you define \”unemployment\” in different ways, you get a different number. In fact, the Bureau of Labor Statistics has been publishing alternative unemployment rates quite openly since 1976. Vernon Brundage lays out the distinction in \”Trends in unemployment and other labor market difficulties,\” written as the November 2014 \”Beyond the Numbers\” from the U.S. Bureau of Labor Statistics.
- U‑1: People who are unemployed for 15 weeks or longer as a percent of the civilian labor force.
- U‑2: Job losers, plus people who completed temporary jobs, as a percent of the civilian labor force.
- U‑3: Total number of people who are unemployed as a percent of the civilian labor force (official unemployment rate).
- U‑4: Total number of people who are unemployed, plus discouraged workers, as a percent of the civilian labor force plus discouraged workers.
- U‑5: Total number of people who are unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force.
- U‑6: Total number of people who are 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.
When looking at how any economic statistic has changed over time, it\’s important to compare apples to apples. So if you are interested in the question of how the unemployment rate has changed, it\’s not useful to point out that different definitions of unemployment provide different answers. These six definitions of unemployment typically move pretty much together.
So if you want to focus on a broader measure of unemployment like U-6 that includes those who have become discouraged in looking for work and part-timers who would like full-time work, fair enough: That measure of unemployment was 17.2% in April 2010, and has fallen to 11.8% in September 2014. But pick a measure of unemployment, any measure of unemployment, and the U.S. economy is doing much better now than back in the dark days of 2009 and 2010.
Of course, the relationships between these measures of unemployment do change over time. For exmaple, the U-2 measure of unemployment has usually been higher that U-1, but they have been about the same in the last few years. Brundage explains:
For most of the history of these series, the number of persons unemployed for 15 weeks or longer (the numerator for U‑1) had been less than the number of people who had lost their jobs or completed temporary jobs (the numerator for U‑2), even during economic downturns. … However, the two series began to converge shortly after the end of the recession, largely reflecting a greater increase in the number of people who were unemployed for 15 weeks or longer during the downturn. In December 2007, the number of people who had been unemployed for 15 weeks or longer (2.5 million) was well below the number of job losers (3.9 million). In September 2014, 4.4 million people had been jobless for 15 weeks or longer and 4.5 million had lost their jobs; thus, the U‑1 and U‑2 rates were very similar, at 2.8 and 2.9 percent, respectively.
The other change is that the ratio between the broadly defined U-6 unemployment rate and the U-3 official unemployment rate has risen. The broadly defined U-6 rate adds the official unemployment rate to the part-timers who would prefer a full-time job and to the \”marginally attached\” who have largely given up looking for work. As this figure shows, the number of the marginally attached has actually not risen too much, but the number of part-timers who would prefer full-time work remains elevated since the end of the recession.
In short, there\’s no conspiracy here by government statisticians to lowball the official unemployment rate. Each measure of unemployment is defined differently. Each one conveys different information about the labor market. And that\’s why the Bureau of Labor Statistics quite openly and transparently publishes six different measures.