What is the real unemployment rate?
The government says it's about 8.1% right now, but it's
using a number from the BLS (Bureau of Labor Statistics)
called the U3. The U3 doesn't include people who gave up
looking for work or people who took part time jobs in order
to pay the bills. It's a percentage of the people in the “labor
force,” which, since, 1994, has come to mean people who
are currently actively looking for work.
For example, let's say you live in a small town where you
have 100 people who are gainfully employed at full-time
jobs, and everybody who needs to earn a living is employed.
The unemployment rate is zero percent. Then a business closes
and 10 people are out of work. Now the unemployment rate
After 26 weeks of collecting unemployment, three of
these 10 unemployed people quit looking for work.
Now your labor force is 97, not 100.
The number of unempolyed workers is 7, not 10.
7 divided by 97 is 7.2 %. Yay, the unemployment
rate has gone from 10% to 7.2 %. Yay, the
economy is getting healthier!
The BLS number which gives us a better approximation of the
real unemployment rate is the U6. But there are those who
say that even the U6 under-reports the actual unemployment
numbers by a substantial margin. (See the note under BLS Table
A-15, in the second link below. If you have been unemployed
for more than 12 months, you might still be among those not
What is the Labor Force Participation Rate?
BLS Alternative measures of labor underutilization:
BLS Percent of population employed:
Real Unemployment Rises to 16.2% in June:
Alternate Unemployment Charts: