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US Unemployment Rates

Updated on November 30, 2012

How The Data is Reported

In the face of four straight years of economic turmoil, many Americans remain either unemployed or marginally attached to their current job. Yet, the unemployment data that we see published in the news does not always seem to correlate to our own personal experiences. There is good reason for this, and it is that which many Americans already know or at least suspect. That is there is a large percentage of the population which is unemployed yet simply not counted. While this is not a new phenomenon, the lag between those who are counted and those who are not is much wider than in recent history. There are various factors and theories that contribute to the cause of high unemployment. However, let’s get a better understanding of at least how they are counted.

It should be first noted that prior to 1940 there was no real official unemployment rate. While the Bureau of Labor Statistics (BLS) was founded in 1884, they did not actually publish official unemployment at that time. While it is clear that unemployment was quite high during the Great Depression, the data was collected by numerous private researchers and some state and local governments to come up with several estimates. In 1940 the Work Projects Administration began to publish official government statistics on employment data.

The Bureau of Labor Statistics (BLS) provides the official unemployment data today. At current (December 2012) the official data suggest that unemployment stands at just shy of 8% nationally. A closer look tells a different story.

The BLS in reality has a couple of measurements to determine unemployment. One is the Household Survey and the other is the Payroll Survey.

The Household Survey generates the unemployment rate from a statistically designed random monthly sampling of roughly 60,000 households.

The Payroll Survey generates an estimate of the number of nonfarm jobs in the U.S. economy, based on a monthly non-random sampling of payroll tax filings of about 160,000 U.S. corporations and government agencies. The survey measures the number of jobs in totality. Yet it is important to remember that some individuals hold more than one job. Many in the financial community regard this to be the more accurate of the two surveys. Yet they ignore the fact that the Household Survey is random in nature while the Payroll Survey is targeted, therefore creating a likely bias.

Over the years it seems the BLS as shown the ability to be persuaded by political players in Washington from both sides of the aisle. While they often present new methods with an explanation, one such example of data manipulation is as follows:

In the mid 1990’s household sampling inside the Household Survey was dropped from 60,000 to about 50,000, which was targeted at eliminating significant surveying in the inner cities in some of the most impoverished areas. While the BLS made claims of corrective statistical adjustments, reported unemployment among minorities mysteriously declined sharply. By 2004 the household survey had been reverted back to the original 60,000 survey.

Regardless of whether or not you dispute the methods, these are how the statistical measures are reported.

U-1: Percentage of labor force unemployed 15 weeks or longer.

U-2: Percentage of labor force who lost jobs or completed temporary work.

U-3:Official unemployment rate”, people who are without jobs and they have actively looked for work within the past four weeks. This standard is set by the International Labour organization, which is an agency of the United Nations. U3 will consider someone employed if they have worked as little as 1 hour per week.

U-4: This is all of the U-3 data Plus discouraged workers, or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.

U-5: This is made up of U4 plus other marginally attached workers, or loosely attached workers, or those who would like and are able to work, but have not looked for work recently.

U-6: This is made up of U5 plus part-time workers who want to work full-time, but cannot due to economic reasons. (Known as Underemployment). This is currently at about 14.5% of the population.

The reality is that if you take the methods of statistical gathering at face value, we still have a real unemployment rate (U6) of in excess of 14%. This is a substantial gap between the official rate reported and that of the experience of the average American. Clearly the data is and has been much worse than political leaders would like to acknowledge for some time.



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    • LandmarkWealth profile image
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      LandmarkWealth 4 years ago from Melville NY

      U6 has improved. But when we look at the partipation rate which is at it's lowest point since about 1980/81 this tells us something is missing. Some of this is a result of baby boomers retiring. But not enough of that can account for the drop in participation. There are number of people who had not planned to retire, yet opted to retire early because they couldn't find work. They are not counted in any of these measures. That plus the fact that enrollment in disability has nearly tripled over the last 4 years which is also not counted as unemployed by any measure. A good chunk of that improvement is misleading. But it is nominally improved.

    • Josak profile image

      Josak 4 years ago from variable

      Well there is a couple of issues with that, the first is included in U5 and U6 are people who say they would like a job but have not looked for one in two months, I am unconvinced that someone who has not looked for work in two months is really unemployed and is not just taking a "reluctant" holiday.

      However it is also worth noting that looking at U6 is actually quite positive from highs of 17.2% in 2009 we are down to 14.6%.