The Labor Department officially announced Friday that the national unemployment rate was 5.1 percent, close to what many economists consider to be full employment. But a look at the department’s “alternative measures of labor underutilization” show why the economy does not feel as robust as the 5.1 percent figure would suggest, and one alternate says the unemployment rate is really 10.3 percent.
The alternate measures explain why, despite the lower official rate, the economy still feels sluggish and the jobs market constrained.
The department breaks down the unemployment rates into six different categories, labeled “U1” through “U6,” based on varying definitions of unemployment. The U1 rate, for example, is anyone who has been unemployed for more than 15 weeks, which excludes people who lost their job recently.
The rate the department has used for decades as the official number is the “U-3” figure, which is defined as people who are out of work and actively looking for a job. This excludes people the department calls the “discouraged,” which are the unemployed who have given up looking for work for at least the time being. It also excludes the underemployed, which are people who are working part-time jobs when they would rather work full time.
The U-4 rate adds the discouraged to the U-3 level, which would place the current unemployment rate at 5.5 percent. U-5 adds those “marginally attached to the labor force” — unemployed people who have looked for a job within the last year — making the rate 6.2 percent. And the U-6 rate adds the underemployed for a total of 10.3 percent.
“I wouldn’t say the headline unemployment rate is counter-productive but I agree that the U-3 does not accurately characterize the amount of slack in the economy, at least relative to prior periods,” said Ben Zipperer, research economist for the Washington Center for Equitable Growth.
Many Republicans have complained that the Obama administration is touting a lower number that doesn’t reflect the real state of play of job creation in America, a call that some Democrats have also made.
Sen. Bernie Sanders, I-Vt., Hillary Clinton’s top rival for the Democratic presidential nomination, has called for the department to use the U-6 rate as the official number. “He thinks [that] figure is the real number,” a spokesman told the Washington Examiner last year.
