The real unemployment rate?
By Catherine Holohan and updated by Walter Sorochan

pink slips

The official US jobless rate

President Obama's "State of the Union" address to the Congress on January 27, 2010, dealt with finding jobs for all Americans.  He professed to do so by giving jobs a high priority.  But can he do it without fixing the economy on "main street?"

As of January 24, 2010: Government reported unemployment rate of approximately 10% .... that is more honest at 17.3% of work force or 26.9 million unemployed.  This is an increase compared to a year ago, 2009, when the government released unemployment rate was 8.5 %. 
NBC Nightly News with Brian Williams January 24, 2010

Unemployment rates as of January 24, 2010:
     6.1 million: unemployed more than 6 months
     15.3 million unemployed = 10 % of work force
     9.2 million part time workers
     1.5 million lost jobs previous month
     1.9 million gave up searching for jobs, discouraged
Total unemployed = 26.9 million or 17.3 % of work force.
NBC Nightly News with Brian Williams January 24, 2010

Roubini, as quoted in Forbes Magazine, sees the unemployment rate at 11% in 2010. Obviously no one really knows for sure as these projections are sheer guesses at best! But some things about employment are obvious! 

The government wants to put a good face on the economy via employment and this is done by using a U-3 formula to give the lowest unemployment number. The high number of unemployed uses U-6 formula.   So who is lying and who is telling the truth if there is one?

Bob Powell, explains the different estimates of the number of unemployed and the unemployment rate (in percent). The official definitions in brief:

    U-3. the official unemployment rate
    U-4. Adding also "discouraged" workers
    U-5. Adding also other "marginally attached"
    U-6. Adding also "part time for economic reasons" -- they want, but can't find, a full time job
    U-6 + Want Job Now. Adding also those government considers "Not in labor force, but persons who currently want a job." While there's a certain tortured logic to the BLS definition, I [ Powell ]  find it stunning that people who say they want a job now, but don't have one, aren't considered part of the labor force.
    U-6 + Want Job Now + Needed to Keep Up w/Pop Growth. Adding also the number of jobs that would be needed to keep up with population growth.

Millions of people have given up on finding work and others forced into working fewer hours than they'd like. The statistics above hardly tell the real story of unemployed Americans. 

But where are these unemployed? What state has highest and lowest unemployment?  Brian Hicks reports unemployment by states as of December 23, 2009:

Image jobs in states

Unemployment rates of 8.5 and 10+ %  is unmistakably bad. The rate for January 24, 2010 is the highest rate since 1983 -- a year that saw double-digit unemployment, nearly 30 commercial bank failures and more than 15% of Americans living below the poverty line.

But the real national unemployment rate is far worse than the U.S. Department of Labor's March figure shows, as announced on January 24, 2010. That's because the official rate doesn't include the millions of people who are reluctantly working only part time because of the poor labor market. And it doesn't include the workers who have given up scouring want ads for seemingly nonexistent jobs.

When those folks are added to the numbers, the unemployment rate rises from 9.3% in March 2008 to 10+ % [ or a high of 17.3% ] as of January 24, 2010. The Bureau of Labor Statistics began tracking this alternative measure (.pdf file) in 1995.

"The situation out there is very grim," says Heather Boushey, a senior economist at the Center for American Progress, a left-leaning think tank. "We have seen the mounting of job losses faster than any point since World War II. I have never seen anything escalate this bad."

Even the Department of Labor's expanded unemployment measure doesn't fully capture how difficult the job market is for American workers. It doesn't include self-employed workers whose incomes have shriveled. It doesn't look at former full-time staff employees who have accepted short-term contracts, without benefits, and at a fraction of their former salaries. And it doesn't count the many would-be workers who are going back to school, taking on more debt, in hopes that an advanced degree will improve their chances of landing a job.

Here's another way to look at the unemployment figures: For every job out there, more than four people are competing for it, says Boushey. Mitch Feldman has seen the results of such intense competition first hand. As president of New York executive placement firm A.E. Feldman Associates, he has watched lawyers accept paralegal jobs after failing to find any companies that are hiring. He has seen Ivy League-educated financial professionals accept lower-paid contract work after searching in vain for banking jobs. "When some of the big investment banking firms had layoffs a year ago, those people were looking for permanent jobs," but now they're taking six-month and yearlong contracts, says Feldman. "And they're competing with other contractors who were on contract before. More supply, less demand, and the prices go down."

For more supporting information: Government statistics


Brian Hicks, “A New Development in the North Dakota Bakken,” Wealth daily Analysis, December 23rd, 2009. [Unemployment in States ]

Commentary on jobs January, 2010: Umemployment 2010

For info about government manipulation of jobs and unemployment, go to: Shadow statististics by government

Holohan Catherine, “The real unemployment rate? Try 15.6%” MSN Money, March 03, 2009. real unemployment rate 2009

Powell Bob, “Unemployment: Official, Effective, Real,” September 12, 2006 Powell website There are different estimates of the number of unemployed and the unemployment rate (in percent). This paper explains the differences and adds other categories that might well be described as unemployed.

Real no jobs Dec., 2009: Real unemployment Dec 2009

Roubini Sees Unemployment Rate at 11% in 2010, Forbes Magazine   Forbes magazine prediction 

The nation: unemployment a time bomb:  unemployment_2010_time_bomb

USA job mess: job mess

Welling Kate "Shadowing reality: Economist keeps tab on government "creative" statistical reports," INSIDE, Volume 8, Issue  4, February 21, 2006. Welling

Williams, Brian:  NBC Nightly News with Brian Williams January 24, 2010

Williams Walter J. (John) is the John Williams behind a fascinating website, shadow statistics , which promises—and delivers—“analysis behind and beyond government economic reporting.”