Monday, July 14, 2014

What is the U-6 unemployment number

U6 Unemployment Rate from 2000-2014
According to the The Bureau of Labor Statistics the unemployment rate dropped from 6.7 to 6.3% in March of 2014.  While these numbers have some thinking the economy is improving, others suggest these numbers may be misleading.

This is especially true when matched up against other statistics provided by the Bureau of Labor Statistics, which show that 800,000 fewer people were in the workforce in March, making the total of 92,594,000 . When you compare these statistics with the unemployment number, we can see that something doesn't add up.  

As a matter of fact, if news outlets report that the unemployment rate dropped in March, that looks good for Obama.  That is the intent of the methods of doing the unemployment number.  The reason they look so good is not because jobs were created, but because the unemployment rate does not include people who have given up looking for work.

A better number than the unemployment number is the U-6 unemployment rate. This number includes all people of working age who are not working.  So, while the reported unemployment rate for March was 6.3%, the U-6 unemployment rate was 12.6%.

The despite the misleading numbers, Obama uses them to his advantage.  Consider the following quote by Obama from a joint press conference with Obama and German Chancellor, Angela Merkel.
We've learned that our businesses created 273,000 new jobs last month. All told, our businesses have now created 9.2 million jobs new jobs over 50 consecutive months of job growth. The grit and determination of the American people are moving us forward. There's plenty more that Congress should be doing from raising the minimum wage to creating good construction jobs rebuilding America. And I want to work with them wherever I can, but I keep acting on my own wherever I must to make sure every American who works hard has the chance to get ahead.
While those numbers may be good public relations for people who don't understand economics, we understand that they are misleading, and not truly representative of true economic status.

Bottom line: the U-6 unemployment number is the number that should be used to measure economic status, and the U-6 number should be reported by the media -- no matter who the president is.

You can check out the history of the U-6 unemployment rate at portalseven.com.