The "real" unemployment rate is hardly mentioned in the media. With the headline unemployment rate standing at 7.6% (single-digit unemployment rates always seem somewhat tolerable) after tagging 10% in 2009, is it any wonder that the employment picture seems to be decent?
The official unemployment rate of 7.6% (also known as U-3) is every politician's favored rate to quote because it notoriously under reports the real unemployment rate. A much more accurate measure of unemployment (still coming straight from the government) is known as U-6. Taken directly from the Department of Labor's website, the U-6 unemployment rate is the "total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers."
U-6 sounds like a real world definition of unemployment. You're either out of work, period, or you have a part-time job because that's all you could find in your attempt to make ends meet. With that in mind, let's take a look at the "real" unemployment rate below:
We've been above 13% unemployment for nearly five years now (side note: The U-6 rate in Los Angeles County is 20.8%). That may be the "glass is half empty" view of the above chart, as surely one could look at it and say, "Well, at least we're moving in the right direction." However, before we get too excited, let's take a look at one more chart that may be even more accurate in depicting the "real" unemployment rate.
Economist John Williams at shadowstats.com offers consulting services to corporations and individuals around the country. He has appeared before the House Financial Services Committee and is considered an expert in many areas regarding government published employment, inflation and gross domestic product numbers. His "ShadowStats Alternate" unemployment rate is downright depressing. Not only has it been above 20% since 2009, but it is NOT moving in the right direction!
It seems some data massaging was going on at the Department of Labor nearly 20 years ago. From the shadowstats.com website: "The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers."
Seems reasonable enough to me. Government number-crunchers have been pressured to "put their best foot forward" for decades, but really started monkeying around with the calculations in earnest back in the 1980s & 1990s. I'll leave it up to each individual to determine which unemployment rate most accurately reflects the real world. It all boils down to a decision between the "good, the bad, and the very ugly."
Keeping watch,
Steve K. Rumsey
Optimus Advisory Group
