The Other Unemployment Rate: 13.9%

You already know that today’s unemployment report clearly shows the economy continuing its slow-motion train wreck.  But, it may be worse.  Here’s an entry in today’s WSJ Real Time Economics blog.  13.9% unemployment is deep recession territory and not far from depression.

The Labor Department’s official unemployment rate hit 7.6% in January, and its jump from 4.9% a year earlier marks the largest annual increase in the unemployment rate since 1975.

But the government’s broader measure of unemployment hit a more stunning level: 13.9%, up from 13.5% in December.

The figure, which largely accounts for people who have stopped looking for work or can’t find full-time jobs, is the highest since the Labor Department started the data series in 1994. It’s just shy of a discontinued and even broader measure that hit 15% in late 1982, when the official unemployment rate was 10.8%. (That data series goes back to the 1970s.)

How does the government calculate two unemployment rates? The widely followed figure is based on people who do not have a job, are available for work and have actively looked for work in the prior four weeks. The official definition of “actively looking for work” includes contacting an employer, employment agency, job center or friends; sending out resumes or filling out applications; and answering or placing ads, among other things.

The 13.9% unemployment rate – known as the “U-6″ for its Bureau of Labor Statistics classification – includes everyone in the official unemployment rate plus “marginally attached workers,” who are neither working nor looking for work but say they want a job and have looked for work recently, and people who are employed part-time for economic reasons – they want and are available for full-time work but took a part-time schedule because that’s all they could get.

Because it’s a relatively young data series, the U-6 doesn’t get much attention beyond researchers. But it may deserve more focus over the coming year as the labor market continues its purge. Many employers are still focused on cutting jobs quickly to get through this downturn, pushing job-seekers aside for an extended period. After long searches – we’re in the fifteenth month of this recession – some job hunters are likely to give up and wait out the recession. Without the broader unemployment rate, many of them wouldn’t be counted.


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