How Underemployed ARE We?

While the president stumps campaign-style to convince the public that his $787 billion stimulus package has averted another Great Depression, millions of people are still out looking for work.

To be fair, President Obama acknowledged that the high unemployment rate, which dipped ever so slightly from 10 to 9.7 percent in January, is still unacceptably high. And some economists argue the loss of jobs would be even higher without the stimulus.

Unemployment By State, Dec. 2009

But the official unemployment rate does not account for a significant number of people who want to work but for one reason or another are unemployed. This group, sometimes referred to as the "underemployed," includes those who have been forced to work fewer hours because of the down economy and those who've simply quit looking out of despair.

If you add in the underemployed, at least 10 million more people are stinging from the employment pinch than official numbers from the Bureau of Labor Statistics indicate. The BLS is the agency charged with tracking employment; the monthly unemployment rate you hear or read about comes from them.

But how do they get those numbers, what do they mean, and how bad is it?

One common misconception holds that the BLS simply tallies the people collecting unemployment checks or otherwise seeking help from state employment offices. In fact, the BLS collects data through a pair of monthly surveys administered to the members of 60,000 households and 160,000 employers, respectively. From these statistical samples, BLS then estimates the total number of unemployed and the overall size of the labor force.

In the household survey, anyone reporting to have a job is considered employed, while those who do not have a job but want and are actively seeking work count as unemployed.

But not everyone fits into one of these categories. If you stop looking for work for more than a month, you're no longer considered unemployed—in fact, you're not part of the labor force at all. That's fine for children, seniors in retirement homes, and stay-at-home husbands or wives, since they truly aren't part of the workforce. But what about those who can't find more than part-time work because of the economy, or those who had been searching unsuccessfully for six months and had given up even though they still wanted a job?

To catch the workers who fall through the cracks, the BLS began tracking several alternate measures of unemployment back in the '70s. Today it publishes six measures, neatly dubbed U1 through U6. The lower the number, the more restrictive the definition of "unemployed."

Unemployment: A Complete Picture? Charting the unemployment rates from all six BLS measures yields a range indicating how many might be out of work (in blue). The pink line shows the official unemployment rate. For reference, the orange line indicates how bad it was estimated to be during the Great Depression.

For instance, U1 only counts as jobless those who have been out of work for more than 15 weeks. The most inclusive, U6, counts anyone who has even casually looked for a job during the past year, along with "discouraged workers," or those who still express a desire to work but have given up the search. U6 also includes people who are working part-time only because they can't find full-time employment. For the official count—the one you'll read in the paper — the BLS uses U3.

Though not everyone agrees the U3 measure most accurately reflects true unemployment, the BLS maintains it is the most objective. Debate will likely continue into the foreseeable future, especially considering the vast discrepancies among the final counts from each.

Calif. Unemployment By Measure, 2009

For January, the U3 number was 14.8 million unemployed. According to the U6 measure, the number is closer to 25.7 million. That's 16.5 percent unemployment instead of 9.7 percent. In California, the difference is even more dramatic—21.1 percent as opposed to 11.3 percent, or nearly double. (That state data, the most recent available, is for December.)

As a point of comparison, the rate of unemployment in 1933, at the deepest point of the Great Depression, has been estimated at 25 percent.

It should be noted that as a tool for tracking economic health over time, none of the measures shows a marked difference from the U3 measure. The line graphs all track the same course.

But for the here and now, being told by anyone—president or otherwise—that unemployment is actually only 9.7 percent and that we're far from the numbers seen during the Great Depression is small consolation to the approximately 25,692,000* Americans who are struggling to find and keep a decent job.

* The BLS appears not to publish the actual U6 number, but we followed their instructions by adding the total number of unemployed, "plus all marginally attached workers, plus total employed part time for economic reasons" to come up with our figure.

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