FEBRUARY
2016

 

By
Larry DeBoer
 
Professor of
Agricultural Economics
Purdue University

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02-25-16

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What's the Unemployment Rate?


The Federal Government's Bureau of Labor Statistics measures employment and unemployment with a survey every month. In January 2016 the BLS estimated that 150.5 million people had jobs.

So everyone else is unemployed, right? The U.S. population was 323 million in January, which means about 172 million people were without jobs. The unemployment rate is the percentage of people without jobs, so that's 53.3 percent. It's down from 55.3 percent after the Great Recession. But it was 51.4 percent just before the recession and as low as 51.3 percent in 2000, after the long 1990s expansion. More than half the population is usually without a job. Why?

Well, more than 60 million of those jobless people are children under 16. Get to work, third-graders, like your great grandparents did during the industrial revolution! We passed child labor laws for good reasons. Kids aren't allowed to work for pay, so we shouldn't count them as unemployed.

There are other folks who shouldn't be counted as unemployed, either. People in long-term care facilities or in prisons, aren't able or aren't allowed to work at paying jobs. Let's remove the armed forces, too. Yes, they're employed for pay, but they're hard for the BLS to count. And maybe it's best that we don't publish where they're stationed and what they're doing every month.

What's left is the civilian noninstitutional population 16 years old or older, which was 252.4 million in January. Subtract the employed, and there were 102 million unemployed, 40.4 percent of the population. That measure peaked at 41.7 percent after the recession. It was 37 percent before the recession and as low as 35.3 percent in 2000.

What would it take to bring that rate down? First, all those young adults in school need to drop out and find jobs. Second, those stay-at-home moms and dads need to take paying jobs. And third, retired people need to un-retire. If they all got jobs, this measure of unemployment would decrease a lot.

But are these people really unemployed? They don't have jobs, by choice. We want young people to stay in school. Stay-at-home parents work hard, just not for pay. And retirement is something most of us look forward to. The BLS has decided that if you're without a job for one of these reasons, you're not unemployed. Take out those 85 million people, and there are 16.5 million unemployed out of a population of 167 million.

That's an unemployment rate of 9.9 percent. The BLS actually calculates this rate and calls it U-6. It counts as unemployed people who don't have jobs but are looking for work, people who are working part-time but want full-time jobs, and people who want a job but quit looking because they got so discouraged. That measure of unemployment is down from 17.1 percent in 2009 but still higher than the 7.9 percent rate in 2006, or the 6.8 percent rate in 2000.

Still, maybe the way to be sure that someone wants a job is if they looked for one. If people count as unemployed only if they looked for work during the survey week, then 7.8 million people are unemployed out of a "labor force" of 158 million. That's the headline unemployment rate, called U-3, and it was 4.9 percent in January. It's down from 10 percent in 2009 but still higher than the 4.4 percent rate before the recession or the 3.8 percent rate in 2000.

It takes time for employers and employees to find one another. If you've been looking for a job for just a short time, chances are you'll find one. If we count as unemployed only those who have been looking for 15 weeks or more, the unemployment rate is 2. That's BLS rate U-1. It was 5.9 percent after the recession, 1.5 percent just before the recession and all the way down at 0.9 percent in 2000.

So what's the unemployment rate? Not 53 percent and probably not 40 percent. It might be 9.9 percent or even 2 percent. The media reports 4.9 percent. For every measure, though, the January 2016 rate was lower than it was after the recession, higher than it was before the recession and higher still than it was in 2000. By every measure, job prospects have improved, but not as much as we'd like.

 

 

Writer: Larry DeBoer
Editor: Keith Robinson