The unemployment rate is one of the most watched indicators of economic health. It’s often tied to stock market and inflation measures, and it’s important that the number accurately reflects the health of the economy. But there are a lot of complications in measuring employment. People who are unemployed may not want to work or can’t find a job that pays enough to afford the basics, or they might have become discouraged after trying to look for jobs and stopped searching.
These problems are compounded by the fact that the Bureau of Labor Statistics only surveys a fraction of households each month. There are different measures of unemployment, including U-3, the official rate seen in the news, and U-6, which includes all unemployed workers plus those with temporary jobs and those considered marginally attached to the labor force (discouraged workers included). The Bureau also surveys employers and keeps records of people who work, and this information is used to calculate the monthly payrolls report.
While these numbers provide important insight into the state of the labor market, they do not take into account structural factors that can affect the labor force. This includes students, retirees and people who choose to stay home for family reasons. The COVID-19 lockdowns have added to these issues, as people have been told by government officials to stay at home or lose their jobs.
LISEP has developed the True Rate of Unemployment, which uses a broader survey to measure employment and aims to capture these nuances. It shows that more than a quarter of working Americans are functionally unemployed, meaning they can’t afford to put food on the table or pay for housing. The number is much higher among minority workers, particularly Black and Hispanic workers.