The Real Unemployment Rate Is Worse Than You Think

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The March jobs numbers, released by the Bureau of Labor Statistics on Friday, were so dismal that Austan Goolsbee, former chairman of President Obama's Council of Economic Advisers, called them "a punch to the gut."

The latest jobs report also shows how misleading the unemployment numbers can be. The jobless rate dipped to 7.6 percent, but only 88,000 jobs were created. That's because half a million people dropped out of the labor force.

What would the real unemployment rate be then, if we were to include everyone who is actually unemployed? The Americans who spent so long looking for work that they stopped even trying, and moved back in with their parents. People who don't have the skills to get any job in their area other than manual labor, but with a bad back or some other injury, they just go on disability instead. In other words, people who would take a job if offered.

What would the real unemployment rate be, if we tried to include some of those others who don't fit into its "unemployed" check box. How many Americans are hardly working, or aren't working at all, or would love to take a full-time job?

AOL Jobs did a calculation and came up with 11.7 percent, or 18.5 million unemployed Americans. Here's how we came up with the number:

More: Could The Jobs Numbers Be 'Cooked'?

First, Include 'Discouraged Workers'

That amounts to 803,000 discouraged workers. These individuals would join the official 11,742,000 unemployed Americans, but also expand the labor force by the same amount. Adding discouraged workers brings the national unemployment rate to 8.1 percent.


Then Add in Involuntary Part-time Workers

Many people are working part-time "for economic reasons"--- because they can't find a full-time job. The laid-off engineer, who's now bagging groceries 8 hours a week, for example. This is a little murkier, since the Bureau of Labor Statistics counts anyone as part-time who works less than 35 hours a week, and it seems a little dubious to call someone unemployed who clocks 34 hours.

More: Employer Explains Why He Won't Hire The Unemployed

Fortunately, another body tallies part-time unemployment in the U.S.: the Organization For Economic Cooperation and Development. The OECD defines part-time as less than 30 hours a week, which is a way to cut out some of the folks we probably wouldn't describe as "unemployed." In 2011 (the last year for which data is available) the OECD counted around half as many part-time workers as the BLS did that same year, so it seems reasonable for the purposes of our "real" unemployment number to at least halve those 8 million involuntary part-time workers.

Adding involuntary part-timers, working roughly less than 30 hours a week, brings the unemployment rate to 10.6 percent.


Don't Forget The Disabled

Federal disability insurance has exploded in recent decades. There are many reasons why 8.9 million working age Americans now receive disability benefits, like baby boomers aging, the rise in the retirement age, and more working women who now qualify. But lots more working age Americans are also disabled because of the decline in low skill jobs. Someone with terrible muscle pain is truly disabled, if their only option for work is manual labor.

More: From Long-Term Unemployment To Full-Time Job: How I Did It

According to Kathy Ruffing of the Center on Budget and Policy Priorities, demographic factors explain two thirds of the growth in disability rolls since 1990. So that leaves approximately two million disability recipients unexplained. Assuming these individuals are all people who would work if there was work available that didn't put undue strain on their medical issues (often back pain), then the "real" national unemployment rate would be 11.7 percent.


It's Probably Worse Than We Calculated

There are lots of other possible additions to the "real" unemployment rate here, including people who retired early because they couldn't find work and mothers who took time out from the workforce to raise small kids, but are now staying home much longer than expected. But there's no specific data on these individuals, so it's almost impossible to estimate.

It is clear, however, that if our unemployment rate reflected who we usually consider unemployed -- people who aren't working, or who are working very little, and would happily take a full-time job if there was one available and they were capable of doing it -- then it would be almost double than it was it is in the books. Almost one in eight Americans who wants to work is not.
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