Dueling unemployment rates

Date posted: February 6, 2014

Whenever the monthly jobless rates are released, there are complaints that the widely quoted rate does not include jobless workers who have stopped looking for work. N.C. State University economist Mike Walden discuesses why this doesn’t pose a problem.

“I probably get each month more questions about this issue than virtually any other economic statistic, and the answer I give is that there is no problem because the government actually calculates several different unemployment rates. They are out there for people to look at. They’re easy to find. It’s a matter that in some cases, only one of these rates is … emphasized.

“The rate that … is widely used is called the widely quoted rate, or the initial rate. And it does have issues, And particularly the issue is if you have an unemployed person who in the last month has not actively look for work — gone to a job interview, sent out a resume or contacted a potential employer — they’re actually going to be called unemployed. In fact, they are actually thrown out of the labor force. And that has gotten a lot of criticism.

“But in fairness to the government, the government calculates another rate that includes those people back in the unemployment rate calculation. In fact, the government goes even further. There is actually an unemployment rate that includes people who are working, but they’re working part-time only because they can’t find full-time work.

“So how much do these unemployment rates differ? Well, let me give you the last numbers that are available: The headline rate (the initial rate; the rate that everyone quotes) at the national level is 7 percent. If you do include those workers who have stopped looking for work — that is, those unemployed people who have stopped looking for work — back in the unemployment rate, that 7 percent goes up to 8.3. And then if you include people who are working part-time only because they can’t find full-time work, it goes up to 13.2 percent.”

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