It would seem to anyone briefly touching on the topic of unemployment, that the very definition of unemployment is simple: anyone looking for work but not finding it. Right?
Not so fast. The Bureau of Labor Statistics (BLS) has many methods for computing unemployment, only one of which is presented as the official unemployment rate.
Further, independent third parties provide their own computations for unemployment rates as they would be performed in other countries, or using methodology BLS applied in the past, but has since changed.
The BLS definition for unemployment is actually relatively simple:
Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.1
This main definition leaves out long term unemployed, “discouraged workers”, and others who have not found work for some time.2 These “marginally attached workers” increase the pool of the unemployed significantly, and are tracked by the BLS as the U-6 measure.3
Unemployment rates (from shadowstats.com)
As can be seen from this chart provided by shadowstats.com, the U-6 measure is significantly higher than the “official” U-3. (Shadowstats also computes their own “SGS Alternate” unemployment rate, which merits a discussion of its own.)
The takeaways from this are straight forward:
- Unemployment rate as officially published (as the BLS U-3) is a relatively narrow measure,
- The BLS U-6 measure is more accurate in defining the proportion of the work force that is idle, and
- There are additional methods for estimating the unemployment rate that provide even higher results.
To tip off some future topics, it’s interesting to note that the U-3 and U-6 measures appear to show a dip in mid-2009, followed by continued rapid increase in unemployment…
© 2009, Pontificus. All rights reserved.
