Does the Unemployment Rate Mask Today's Job Market Hardship?

July 9, 2013

For the past three months the unemployment rate has remained stuck between 7.5 percent and 7.6 percent. This is more than half the unemployment rate at the end of 2007, the last time the job market was at or near full employment.  In other words, the recent unemployment rate is between 2.5 and 3.0 percentage points above the level we should expect at full employment, says Gary Burtless, a senior fellow at the Brookings Institution.

Is the standard unemployment measure "masking" the true extent of hardship in the job market?  It's certainly telling us the job market is a long way from good health. The standard unemployment measure certainly misses some kinds of labor market hardship.

  • Since the end of 2007, the number of employed workers who work part-time but want full-time jobs has increased about 4.3 million, or more than 70 percent.
  • These part-time employees get counted as "employed" in the employment statistics and are missed in the standard unemployment numbers, so in a sense their hardship is missed by the unemployment rate.
  • In May there were also 780,000 discouraged workers -- these are people who have looked for a job in the recent past and would be willing to take a job if they thought work was available, but have given up their job search because the effort seems pointless.
  • This number is twice its level in December 2007.
  • Discouraged workers, because they haven't looked for work in the past month, also are missed by the standard unemployment statistics.

The Bureau of Labor Statistics (BLS) calculates a measure of unemployment that gives weight to the hardship of workers on involuntary part-time hours and workers too discouraged to actively look for a job.  That measure, called the "U-6 unemployment rate," stood at 13.8 percent in May 2013, a full 5 percentage points higher than it was at the end of 2007, before the Great Recession began.  This estimate can be interpreted to mean that 13.8 percent of the actual plus potential workforce is suffering hardship -- job loss or involuntary short hours -- as a result of the slow recovery from the downturn.

Even though the standard unemployment measure fails to capture every dimension of labor market hardship, the measures just mentioned all point in the same direction:  The job market is recovering, but it is recovering slowly and the patient remains a long way from good health.

Source: Gary Burtless, "Does the Unemployment Rate Mask Today's Job Market Hardship?" Brookings Institution, July 2, 2013.

 

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