Along with GDP growth, the unemployment rate is the most recognized economic statistic in the United States. It’s too bad it is so misleading. “The unemployment rate declined to 4.6 percent in November…” are the
very first words of the Bureau of Labor Statistics’ news release about the November 2016 survey data. That must seem
incredibly wrong to many Americans. And that is because it is, in fact, not true that 4.6% of Americans who want a full-time job don’t have one. The unemployment rate is something more specific and less meaningful.
As measured by the BLS, the unemployment rate is defined as the percentage of unemployed people who are
currently in the labor force. In order to be in the labor force, a person either must have a job or have looked for work in the last four weeks. A person only needed one hour in the prior week to be considered employed.
This leaves out a ton of relevant people. According to the November 2016 data, over 5.5 million Americans said they
want a job, but don’t have one, and are not considered a part of the labor force. If these people were included in the unemployment rate, it would jump to 8.2%.