NCPA - National Center for Policy Analysis

Tracking the Unreported Unemployed

January 9, 2012

The last three years have seen some of the highest unemployment rates reported since the Great Depression.  Unfortunately, the reality is even worse than these oft reported figures suggest.  This is because the Bureau of Labor Statistics (BLS) calculates the official unemployment rate by looking at those who are employed or who have actively looked for work within the last four weeks, say Aparna Mathur and Matt Jensen of the American Enterprise Institute.

As a consequence, the official rate excludes workers who have decided to drop out of the labor market altogether.  The official rate also ignores those who settle for part-time work since they are unable to find a full-time job.  Recognizing this shortcoming, the BLS also reports the U-6 rate, which includes those who have sought a job sometime in the last 12 months and those who have accepted part-time jobs but would prefer full time.  The U-6 rate better demonstrates the true precariousness of the United States' economic situation.

  • The official unemployment rate moved from 5 percent in January 2008 to a high of 10.1 percent in October 2009, and a current rate of 8.6 percent.
  • It rests 3 points above the 1948-2007 average of 5.6 percent.
  • The U-6, on the other hand, has moved from 8.8 percent in December 2007 to 17.4 percent in October 2009 and 15.6 percent in November 2011.

The U-6 best captures the true depth of the recent economic downturn.  Furthermore, it bears mention that members of this group (which can be measured as the difference between the U-6 and the official rate) are reaching record numbers during the current recession.

  • Currently more than 5.7 million Americans have been unemployed for more than 27 weeks, or an astounding 43 percent of all unemployed.
  • Today the gap between the U-6 rate and the official rate is 7 percentage points, while at the start of the recession there was only a 3.8 percentage point difference.
  • Since 1994, the gap between the official rate and the U-6 rate has averaged less than 4 percentage points and has only once exceeded 5 percent.

The danger of this record number of long-term unemployed is that in addition to harming their financial security, their skills rapidly deteriorate, which further worsens their employment prospects.

Source: Aparna Mathur and Matt Jensen, "Tracking the Unreported (15.6%) Unemployed," Real Clear Markets, January 4, 2012.

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