How Useful is the ‘Unemployment Rate’? Five Humans Who Don’t ‘Count’

Laura Williams asks an important question — how useful is the unemployment rate? It’s a question that’s been valid since the Obama years when the government started to play games with their estimates even more than it had before.

BLS data are fallible measures that diagnose only part of our nation’s job market health.

he official “unemployment rate” in the US is nearing historic lows, according to a recent announcement. For young readers, especially, this may come as a surprise. You may see your friends and family struggling to find enough well-paying work to make ends meet, and you may have personally experienced the frustration of wanting a job but not finding one.

Your experience may not be as out of the ordinary as the official numbers indicate.

The “unemployment rate” is the result of assumptions and calculations by the Bureau of Labor Statistics (BLS), and is cited in a range of claims by economists and politicians. But most pundits don’t know how it’s calculated, let alone what changes in that key statistic might indicate.

The unemployment rate is just 3.7 percent. Does that mean that 96 percent of Americans are going to work this morning? Not even close.

All percentages are expressions of the ratio of one thing relative to something else. The “unemployment rate” only counts “labor force participants”—about 63 percent of the population in 2019.

Non-citizens working here and others working “off the books” won’t show up; neither do active-duty members of the military (though other kinds of federal employees do). People classified as disabled or who are institutionalized or incarcerated aren’t “labor force participants,” nor are retirees or full-time students. People who’ve been unemployed so long they’re no longer actively looking (some states require job search hours to be reported) are considered “discouraged workers” and dropped from labor force calculations.

In short, BLS data are fallible measures that diagnose only part of our nation’s job market health.

Read more: Foundation for Economic Education

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