Are you out of work? If so, some of the most recent economic data regarding the unemployment rate might sound like cause to be optimistic. 242,000 jobs were added to the U.S. economy in February, applications for unemployment benefits continue to drop, and the unemployment rate has fallen from 8.3 percent at this time four years ago to just 4.9 percent.
But 4.9 percent, the number currently cited by the U.S. Department of Labor as the official, or “U-3,” unemployment rate, counts only those who have been actively looking for work within the past four weeks. The reality is that there are plenty of people excluded from the narrow definition we use to describe “unemployment” who are unable to or prevented from working a full-time job.
The complexities of counting
A more appropriate statistic for measuring unemployment is the “U-6,” which includes “persons marginally attached to the labor force, plus total employed part time for economic reasons” as a percentage of those working. In other words, this metric includes people who are underemployed, not drawing unemployment benefits, and forced to work part-time jobs for purely economic reasons. As of February 2016, the U-6 rate is 10.1 percent.
But even the U-6 is somewhat misleading. Because “searching for a job” is still limited to the past four weeks, those who become “discouraged” or “drop out”—often because there aren’t even part-time or contract jobs to apply for—are not counted as a part of the labor force.
In places like Baltimore, where tens of thousands of industrial jobs have been outsourced abroad, over 30 percent of the city’s potential workforce is mired in chronic unemployment and has dropped out of the labor force entirely. The official jobless rate, however, is somewhere around 7 percent. Also invisible to the U-6 rate are parents who opt to stay home to save money on childcare and early “retirees” who would really like to be working if they could find a job.
One helpful metric is the labor force participation rate, which represents the percentage of the population (16 years and older) that is either employed or actively looking for work. At 62.9 percent, it is close to its lowest point in almost 40 years. One explanation is that more Americans are going to college and living longer. Another is that there are a lot fewer jobs available than people who are willing to work them.
According to the White House and many media accounts, the US economy has bounced back from the dark days of the Great Recession. We have now regained the 8.7 million jobs that were lost between December 2007 and early 2010 and continue to see a growth in jobs.
The problem is that most of the job growth has been in low-wage, temporary, and benefits-lacking positions in retail, bars, and fast food. Jobs that pay poverty wages are hardly a sign of economic health. And the workers lucky enough to keep their jobs have seen their wages decrease or stagnate in recent years, while wealth inequality has soared to heights not seen in nearly a century.
The 65 consecutive months of net job growth—the longest streak in modern history—is not exactly leading to social and economic harmony (Donald Trump, anyone?). These days, simply having a job is not enough.
The problem with saying that the unemployment rate is 4.9 percent or that 19 out of every 20 people are working is that it obscures how many Americans are struggling just to get by.
As shown in the previous section, if we include the unemployed who have been looking beyond one month, the underemployed who don’t make enough to support themselves, and the permanently discouraged, the unemployment rate gets much higher.
But there are other unemployed people who are invisible to the statisticians in Washington. Currently, more than 2.3 million Americans who are incarcerated would likely be working if they were free. Similarly, there is no real way to know how many undocumented would-be workers are looking for any work they can find.
What is the real employment rate? By now it should be clear this is not an easy question to answer. But whatever that number is, it’s far higher than 4.9 percent.