Mark Twain once said, “There are three kinds of lies: lies, damn lies and statistics.” There is probably no better example of this than government reporting on unemployment.
There has been a great deal of discussion the past few years over the subject of unemployment — and for good reason. Things have been improving recently and the hope is that trend will continue. But any way you look at it we still have a long way to go to get back any way near where we were before the “Great Recession” started.
We also know that a lot of games get played with the unemployment numbers. You and I would think that if you don’t have a job and you want one, you are unemployed. But the government doesn’t look at it that way. They have a variety of measures for unemployment and it’s important to know which one they are talking about.
The Bureau of Labor Statistics calculates six alternate measures of unemployment, U1 through U6, that measure different aspects of unemployment. U3 is the official unemployment rate and is the number of people who are without jobs and have actively looked for work within the past four weeks. U4 is U3 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. U5 is 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. U6 is U5 plus underemployed part-time workers who want to work full time, but cannot find a full-time job.
Typically, when the BLS talks about unemployment, they are referring to U3 unemployment. As of January that rate was 8.3 percent. The U6 unemployment rate was 15.1 percent. That’s a big difference. The reason is that if you are unemployed but haven’t looked for a job in the past four weeks, or haven’t looked because you got discouraged and thought there was nothing there for you, or you are working part time but really wanted a full-time job — according to the government official U3 figures you are not unemployed. You are not even counted. I suspect that if you fall into one of those categories, you know you’re there and you think you’re unemployed.
So there you have it folks — unemployment properly explained. Confused? Good. Then they accomplished their goal. Thanks for reading.
NICK MASSEY is a financial adviser and owner of Householder Group Financial Advisors in Edmond. Massey can be reached at www.nickmassey.com. Securities offered through Securities Service Network Inc., member FINRA/SIPC.