U-6 Unemployment Rate Was 14.8% in February

Let's "keep it real" for a minute.

The "official" unemployment rate that is released by the US government every month is complete garbage.

The "official" unemployment rate dramatically understates the true number of unemployed (and underemployed) people.

The Bureau of Labor Statistics releases six different numbers every month - U-1, U-2, U-3, U-4, U-5 and U-6.

U-3 is the "official unemployment rate". This number (as you now probably know), came in at 8.1% for February 2009.

Everyone freaked out over this number, noting that it was much higher than the 7.6% unemployment number in January and the 7.2% unemployment number in December.

In actuality, the unemployment rate was much higher. If you want to be truthful about the employment situation in the United States, then you need to refer to U-6.

This number was 14.8% in February 2009.

These aren't numbers that I am just grabbing out of the air - these are taken straight from the Bureau of Labor Statistics web site.

So who does the 14.8% number include that the 8.1% number (for February 2009) does not?

How about "discouraged workers"? These are people who have stopped looking for work because they feel that the effort is a waste, and that there are no jobs available for them. Discouraged workers have looked for a job sometime in the past 12 months but have not been able to find one.

If we added "discouraged workers" to the 8.1% "official unemployment number" that was quoted for February of 2009, then we are left with a number of 8.5%.

Now, how about "marginally attached workers"? "Marginally attached workers" include those who are not currently looking for work, but have attempted to look for a job sometime in the recent past and would take a job if offered. "Marginally attached workers" include "discouraged workers".

"Marginally attached workers" are not included in the "official" unemployment number because they have not looked for work in the past 4 weeks.

If we add "marginally attached workers" to the 8.1% "official unemployment" number for February, then we are left with 9.3%.

The U-6 number (which was 14.8% in February of 2009), also includes those people who have been forced to take part-time jobs for "economic reasons".

These are people who want (and need) full-time work, but aren't able to find it, so they take a part-time job instead.

Should we exclude people from the "official" unemployment numbers that want a job but can't find work?

Should we exclude people who have given up on finding a job completely?

Should we exclude people who are willing and able to work full-time, but are forced to take part-time jobs because of the poor economy?

I don't think so either, and it's interesting how the federal government massages the unemployment numbers to make them look much better than they actually are.

Some people look at the current "unemployment rate" of 8.1% in the United States and note that "things were much worse during the Great Depression".

Here's the thing though - the "official" unemployment rate is calculated differently now than it was back then.

The oft-quoted unemployment rate of 24.75% in 1933 would be a great deal lower if it was calculated according to today's "official" formula - probably 5-10% lower.

Things were certainly worse in 1933 than they are now - but there weren't three times as many unemployed and underemployed people.

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In the end, when it comes to the "official" unemployment numbers - don't believe what you are being told. Things are actually much worse than what the U.S. government is reporting.

Filed under: The Economic Meltdown

19 COMMENTS - What Say You?

Comment by noname on March 06, 2009 @ 11:29 pm

It's fine if you want to use a different figure to measure unemployment, but you can't then compare that number to the one from a different measurement. You have to compare it to itself over time. Specifically, you're making a big deal about "unemployment is really 14.8%!!!! not 8.1%. That's such a big difference!!!" But if you compare 14.8% in February to the 13.9% in January (using the same U-6 measure), you'll see that unemployment is increasing (and if you use that measure, more steeply than the official measure) but it's not as if it all of a sudden went from 8.1% to 14.8% like your essay seems to suggest.

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Comment by Dave on March 06, 2009 @ 11:42 pm

Hi

What I'm doing is comparing the "official" unemployment rate (U-3) with the broader measure of unemployment (U-6).

I'm not suggesting that it went from 8.1% to 14.8%.

I'm suggesting that the government massages the numbers to make things look better than they actually are.

Thanks for your comment.

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Comment by Badmans on March 07, 2009 @ 4:44 am

but it's not as if it all of a sudden went from 8.1% to 14.8% like your essay seems to suggest.

At no point during the article did i think this, you need to read things properly. Obviously, i think the point is the governments way makes them look a bit better, but as long as their comparing the same U-x then it does not make much difference as the rate of change will be representative.
I would be interested to know (being from england) what proportion of 'discouraged workers' have hope of finding a job again, or are they prepared to live off benefits and the grey market for life?

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Comment by philip on March 07, 2009 @ 8:52 am

@noname and @badmans

I believe the way the unemployment numbers were calculated in 1929 is similar to the way it is calculated in U6. The unemployment during the 1929 - 1933 Great Depression was 27%.

It is a bit disingenuous when the government uses a completely different way of calculating unemployment now and use these same figures to compare against the unemployment rate during the great depression (when the unemployment rate was calculated quite differently).

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Comment by Mark on March 07, 2009 @ 11:48 am

noname - I read the same article you did, and I didn't find any confusing suggestions that the number JUMPED from 8.1 to 14.8. There is a difference to these two numbers, in that the former number conceals almost half of those without jobs.

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Comment by Anon on March 07, 2009 @ 12:19 pm

Actually there are some academic papers that examine how the US employment appears to be lower than it maybe should otherwise be. One of the main findings is that the high imprisonment rate for certain groups leads to artificial deflation of the unemployment rate-those more likely to have trouble finding jobs are at higher risk for being removed from the job-seeking population.
Just another way that the UR misses some aspects of the real picture.

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Comment by Alexander on March 07, 2009 @ 11:22 pm

good article.
It points out the distortion of the unemployment rate in the US.
all what I needed.
(I am from Europe and the EU does kind of the same with their statistics)
thanks

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Comment by noname on March 08, 2009 @ 5:33 pm

I didn't say the essay specifically said unemployment went from 8.1% to 14.8%. But in a climate of growing unemployment, when someone says unemployment is really closer to number "x" when you calculate it this way, it is important not to take that number out of context and look at the history of unemployment calculated by that measure before trying to interpret it. For example, if unemployment using U-6 had been 15% for 2008, 14.8% would be fairly normal and actually an improvement over last year. It is the specific build up of how this article was written that I think may mislead careless readers. It primes the reader with a trend of low numbers (7.2, 7.6, 8.1 - see anchoring and adjustment theory) then immediately after suggests unemployment is really closer to 14.8. This is likely to lead the reader to compare the 14.8 to the 7-8 range and "freak out" like the reader suggests the populous did when the higher number of 8.1 came in. If the point of the article is to promote a different measurement of unemployment, it should include a historic trend of both measures.

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Comment by UnemploymentMonkey on March 12, 2009 @ 6:52 pm

The post by noname on March 08, 2009 @ 5:33PM was cogent and interesting. However, clicking on the BLS hyperlink in the article shows that U-6 went from 9.5% in February 2008 to 14.8% in February 2009. Further cursory research on the BLS sites shows an October 2000 unemployment rate of 3.6% & a February 2009 unemployment rate of 8.9% which indicates about 2.5 times as much unemployment now versus then. I would think that the fact that these data were a click or two away not only discounts at least the tone of the critique by noname but also further supports the thesis of Dave.

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Comment by daniel on March 21, 2009 @ 5:14 pm

I've already learned not to believe anything the government says at face value. In the midst of all the financial woes the country and world is dealing with, we're continuing to print out more money for the banking cartels & friends disguising it as "bailouts."

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Comment by Tom Dockery on March 28, 2009 @ 1:16 am

There will be one more added to the rolls at 12 Noon EST on Jan.20,2013.

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Comment by Russ Strong on April 13, 2009 @ 8:39 pm

The article is pretty much on the mark. The BLS is worthless. It's really a depression. Unemployment
is probably twice the official stats. BLS is politically
motivated.

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Comment by John b on May 07, 2009 @ 7:08 pm

�Some banks will convert preferred shares into common shares, diluting the share price.� - and that may not be enough for some for banks to raise capital.
I smell another taxpayer funded bailout. Either way, investor or taxpayer will lose.

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Comment by Drzlecuti on July 07, 2009 @ 12:42 pm

Dave, it's a shame some people don't know how to read...obviously, you didn't say unemployment went from 8.1% to 14.8%, but that the latter was a truer measure than the former.

I haven't found a reliable source for the comparable measure in 1929-1933 or for any other "depression-era" unemployment rate. Are the frequently cited figures in the mid-20% range comparable to U-3, U-6, or something else?

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Comment by Unicle on July 12, 2009 @ 4:36 pm

>>>I'm suggesting that the government massages the numbers to make things look better than they actually are.

Do other countries do this, too?

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Comment by DAVID BIONDI on October 02, 2009 @ 4:41 pm

U-SEE THE TRUTH IS BAD FOR BUSINESS THATS THE TRUE MOTTO OF THE GOV!

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Comment by kiwichick on October 02, 2009 @ 10:30 pm

heard on bloomberg this morning(2/10/2009)

population increase in the US means 120,000 + jobs need to be created each
month

is continual population growth sustainable in the US?

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Comment by jebbez on December 01, 2009 @ 3:28 pm

Shame on you Tom Dockery .........don't you know that P + VP = 2 more unemployed!

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Comment by Berta on January 08, 2010 @ 8:10 pm

Does anyone know if any of the self-employed are counted in the U? There are a lot of self-employed people. e.g. electricians, plumbers, handy-people etc... They can't collect unemployment so probably don't register at the unemployment office. But they do pay taxes. Just curious.

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