Real Unemployment

What is the real unemployment in the US today. The unemployment typically quoted is the “U3” rate. It is currently at 5.0%. Unfortunately this rate is not a true reflection of the employment situation in the US today. The reason is, the U3 rate does not include unemployed people that the Labor Department decided has given up seeking employment. While the U3 rate might be a reasonable to use when the economy is producing more jobs than there are people to accept them. In this case, if the jobs are available but a person elects not to pursue it then it is probably appropriate not to count them. However, that is not the case today. Today the economy is not producing excess jobs so the more appropriate unemployment rate to look at is the U6 rate. This rate considers all unemployed people which currently stands at 9.7%.

Another way to look at the current unemployment situation is to look at the labor force participation rate, which today stands at the low rate of 62.7%, the lowest rate since the 1970’s. The implication is that there are 94,000,000 Americans of working age and capable of working that are not working.

No wonder people do not feel good about the employment situation, even when all of the news is positive.