Is the U.S. Unemployment Rate Really 9.0 Percent?

unemployment rateWhen you heard that the unemployment rate was 9.0 percent in April 2011, did you think that percentage included you? Even if you don't have a job and aren't happy about it, you and thousands of others may not have made the cut for what is considered "unemployed" in that 9.0 percent. The truth is, there are many ways to calculate unemployment, so it may be better, or worse, than you think.

Every month the Bureau of Labor Statistics (BLS) issues an "Employment Situation News Release" with the national unemployment numbers. Most news stories cover the top-level information stating, for example, that the national unemployment rate was 9.0 percent in April. But, how is the 9.0 percent measured? Who counts as unemployed? And, why do some pundits say the unemployment rate is really 15 percent or more?

Those who put national unemployment at 15 percent are including people like your neighbor, who hasn't had a job in 10 months, is discouraged, and has given up looking after months of rejections. It also doesn't include your friend who switched temporarily to a lower-paying career to make ends meet, or your sibling who is working part-time but would rather be working full-time.

Who does it include? Everyone who is actively looking for a job but doesn't have one.

This number, most commonly reported by the press, is titled, "U-3." It is the third unemployment measurement out of six that the BLS calculates each month. Below we list the six different answers for the national unemployment rate that the BLS produced in April 2011. These numbers varied from 5.1 percent to 15.9 percent. The following list explains all six measures of national unemployment and includes the national, seasonally adjusted employment rates for each category in April 2011. Which ones do you, or someone you know, actually fit into?

  • U-1: If you have been actively looking for work for over 15 weeks, and have not found any job (full or part-time), then you are truly unemployed. This is the strictest definition of unemployment. Rate: 5.1%
  • U-2: This isn't a submarine or rock band, it is another measure of unemployment. If you had a job and were let go involuntarily, or had a temporary job that ended, and have been actively looking for work ever since, you are in this category. Rate: 5.3%
  • U-3: This is the standard rate, and includes everyone who is actively looking for a job now. The difference between this and U-2 is that people who previously didn't have a job, e.g. were a student or homemaker, or who left a previous job voluntarily, don't count in U-2, but do for U-3. Rate: 9.0%
  • U-4: If you gave up actively looking for a job because you don't think there are any for you (you are discouraged), you are in this category together with everyone from U-3. Rate: 9.5%
  • U-5: If you would take a job, but don't have one, whether you are actively looking for work or not, you are in this category. The difference between this rate and U-4 is that you don't have to be so pessimistic about job prospects that you are not actively looking; you may just not feel like it. Rate: 10.4%
  • U-6: If you don't have a full-time job, and wished you did, you are in this category. It includes all of U-5, plus people who are employed part-time but want a full time job. Rate: 15.9%

There are two more categories of workers who may be effectively un- or underemployed, but, like retirees, students, homemakers, and prisoners, don't count as unemployed in any of the six measures BLS tracks.

  • Full-time workers not doing the job they are most qualified to do. If you are a carpenter who has had to take a full-time job at Home Depot because there is no construction work, you don't count as under or un-employed, even though you may be earning less than half what you would as a carpenter.
  • People who have "started their own business" because they couldn't find a job. All self-employed people are considered to be employed, even if their business is failing or generating very little income. If you lose a job at the cosmetics counter at the mall and decide to sell Mary Kay because you can't find another job, you don't count as unemployed, even if you are not successful.

Is your head spinning yet? Throw in the huge state-by-state variations in even the standard unemployment rates (over 14 percent in Nevada versus under 4 percent in North Dakota), and the rate in your community could easily be almost anywhere between 1 percent and 30 percent or more.

For example, counting only people who have been actively looking for work for 15 weeks or more in North Dakota gives an unemployment rate of 1.1 percent in 2010.

On the other hand, counting people in Nevada who wish they had a full-time job and don't have one, including those who gave up and went back to school, took a low paying retail job because they couldn't find a job that uses their skills, started a small business, or got caught stealing and are now in jail, the rate is likely well over 30 percent.

The good news is that the economy does appear to being turning around. No matter how you measure it, more people are working now than a year ago. There are just still a lot of people out there who want a good full-time job, and haven't found one yet.

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