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Most Americans think the employment figure we read about in today's news is simply the total number of eligible workers in the country minus the number of people who are unable to find a job. Simple enough, but is that number actually represented in the official unemployment figure we read about in the news?
Unemployment statistics are reported by the Bureau of Labor Statistics (BLS), which is the same entity that calculates and reports the inflation figures.
The BLS actually figures unemployment six different ways and they are labeled U1 through U6.
The figure we hear about, is the official unemployment rate and is the one the government uses to gauge its policies is U3.
Today U3 is reported to be about 9.4 percent, which is hardly anything to brag about. Adding insult to injury, U3 has many adjustments made to it that most people don't realize.
For instance, the U3 figure counts partial or under employment as full employment. If you're an engineer who can't find working doing engineering and need to cut lawns to make ends meet, U3 counts you as employed.
If you only work two hours a week because there's not enough work full time, you are also "employed” under U3.
If you get discouraged looking for work and give up looking, under U3 you are dropped from the unemployment number and are now considered employed.
If you are unemployed, can't find work, but come to the end of your unemployment benefit checks, you are again dropped from the unemployment total.
It sounds incredible but this is how they actually calculate U3.
The birth-death assumption is another “adjustment” in U3 and it is not a mortality adjustment as the name implies. This birth-death figure is an assumption the BLS makes that assumes new businesses are created that employ an arbitrary number of Americans. This assumed but unidentifiable number of jobs is added to the number of working Americans. This “birth-death” adjustment can routinely add anywhere from 50,000 to 100,000 or more jobs per month, making the unemployment number appear much more palatable.
Through these adjustments the unemployment figures we read about in the news may not reflect what you and I see in the real world. To get a more realistic view on how many Americans are out of work, U6 is the broadest measure of unemployment and may better reflect the real number of non-working persons in the population.
U6 basically reflects the number of eligible people over 16 who want full time work but can't find it. U6 is currently reflecting an unemployment rate of approximately 17 percent, which is probably more in line with what you and I see in the job market.
Marc Cuniberti hosts the financial radio show “Money Matters,” on KVMR FM 89.5 and 105.1 or www.kvmr.org, which airs at noon on the first and third Thursday's of the month. His website is www.moneymanagementradio.com
Unemployment statistics are reported by the Bureau of Labor Statistics (BLS), which is the same entity that calculates and reports the inflation figures.
The BLS actually figures unemployment six different ways and they are labeled U1 through U6.
The figure we hear about, is the official unemployment rate and is the one the government uses to gauge its policies is U3.
Today U3 is reported to be about 9.4 percent, which is hardly anything to brag about. Adding insult to injury, U3 has many adjustments made to it that most people don't realize.
For instance, the U3 figure counts partial or under employment as full employment. If you're an engineer who can't find working doing engineering and need to cut lawns to make ends meet, U3 counts you as employed.
If you only work two hours a week because there's not enough work full time, you are also "employed” under U3.
If you get discouraged looking for work and give up looking, under U3 you are dropped from the unemployment number and are now considered employed.
If you are unemployed, can't find work, but come to the end of your unemployment benefit checks, you are again dropped from the unemployment total.
It sounds incredible but this is how they actually calculate U3.
The birth-death assumption is another “adjustment” in U3 and it is not a mortality adjustment as the name implies. This birth-death figure is an assumption the BLS makes that assumes new businesses are created that employ an arbitrary number of Americans. This assumed but unidentifiable number of jobs is added to the number of working Americans. This “birth-death” adjustment can routinely add anywhere from 50,000 to 100,000 or more jobs per month, making the unemployment number appear much more palatable.
Through these adjustments the unemployment figures we read about in the news may not reflect what you and I see in the real world. To get a more realistic view on how many Americans are out of work, U6 is the broadest measure of unemployment and may better reflect the real number of non-working persons in the population.
U6 basically reflects the number of eligible people over 16 who want full time work but can't find it. U6 is currently reflecting an unemployment rate of approximately 17 percent, which is probably more in line with what you and I see in the job market.
Marc Cuniberti hosts the financial radio show “Money Matters,” on KVMR FM 89.5 and 105.1 or www.kvmr.org, which airs at noon on the first and third Thursday's of the month. His website is www.moneymanagementradio.com
