What does the unemployment rate actually tell us?

Unemployment rate reduced to 5 percent in October 2015. How are different segments of our population doing?

As mentioned in a previous Michigan State University Extension article, “Has the nation reached full employment?” unemployment rates in the United States have been steadily declining over the last six years. According to the Bureau of Labor Statistics, the seasonal adjusted unemployment rate has gone from 10 percent in October 2009 to only 5 percent in October 2015. What does this actually tell us?

What does seasonal adjusted mean? Generally, the unemployment rate reported in the news is seasonally adjusted. The Bureau of Labor Statistics uses a statistical technique to remove seasonal influences that happen regularly such as weather changes, holidays and school schedules from the data in order to show more general economic trends over the time period.

Who do they count in the unemployment numbers? To be considered in the “official” unemployment rate, you have to be 16 or older and have been laid off from a job and waiting to be called back or actively seeking employment in the last month. This low, 5 percent “official” unemployment rate does not include “marginally attached,” “discouraged workers” or “underemployed.”

  • A marginally attached person is someone who is also not working, wants to work, is available for work, has looked for work in the last 12 months but was not actively seeking employment in the prior four weeks.
  • Discouraged workers are also not working and have given a job market-related reason for not currently looking for work.
  • Underemployed are people employed part time but want and are available for full-time work.

The Bureau of Labor Statistic has been providing “alternative measures of labor underutilization” that include both broader and narrower definitions than the official unemployment rate since 1994. These alternative definitions include the marginal, discouraged and underemployed described above. If the marginally attached, discouraged worker and underemployed individuals were included, the seasonal unemployment rate in October 2015 is 9.8 percent.

Analyzing certain segments of the population, the unemployment picture is much higher. For instance, the seasonally adjusted unemployment rate for youth (16-19) during the same time period is 15.9 percent. This rate is also on the decline and the lowest it has been since November 2007, but significantly higher than the “official” unemployment rate of 5 percent. If you look even closer at the data, you will find the seasonal adjusted unemployment rate for Hispanic and Black or African American youth (16-19) is 22.4 percent and 25.6 percent during this same time period.

As the information above explains, there are many segments of the population that unemployment rates are still very high, especially with our youth. How can we address this issue and better prepare the next generation of workers?

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