“Over the years, the rate of unemployment has become not just a gauge of the health of the labor market but the most common yardstick policymakers use to assess the health of the economy as a whole.
By this measure, despite the pandemic, things don’t look so bad right now. The headline unemployment rate for December stood at 6.7 percent. In recent years, there’s been some public recognition that that the headline rate is something of an undercount, since it only includes people actively looking for work; so-called discouraged workers who are unsure of how to go about a job search or who are too discouraged to try any more don’t show up in that top-line number. And, for decades now, the BLS has diligently supplemented the headline unemployment rate with additional information about these workers.
But it turns out that discouraged workers aren’t the only problem with the unemployment rate. In fact, these days the headline unemployment rate isn’t just an undercount, it actually paints an alternate reality that masks the degree to which low- and moderate-income people are hurting. As a result, policymakers believe these Americans are better off than they actually are.
There are two additional problems with the way we count people who are unemployed.
First, there’s no accounting for how many hours a part-time worker is working.”
“Our unemployment figures make it look like the person working a handful of hours because that’s the only work they can get is just as “employed” as a full-time CEO. In practice, this means that the unemployment rate actively obscures how many workers are living in poverty in part not because they don’t have a job, but because they can’t get enough hours.
Second, the data doesn’t indicate whether the job a worker is doing pays enough to keep them out of poverty.”
“Anyone who wants full-time work but can only find part-time work, and those working full-time but earning too little to climb above the poverty line, should be considered functionally unemployed. I’ve begun to calculate this, which I’ve dubbed the True Rate of Unemployment. And the TRU in December wasn’t 6.7 percent — it was an alarming 25.1 percent.”
“In February 2020, when the economy was supposedly “hot,” the official BLS release suggested that a mere 3.5 percent of Americans were unemployed, but the “TRU” number was 24 percent.”