The Declining Unemployment Rate

Jan. 21, 2014
Unemployment numbers can be insightful but distracting economic indicators.

The unemployment rate fell to 6.7% in December. The decline was welcomed by most, and to those who think it matters, it was a harbinger of better days ahead. A frequent question at presentations involves the question of those people who have given up looking for a job or who are working at part-time jobs because they cannot find a more-desirous fulltime job.

These folks are called the “Unemployed, Marginally Attached Workers, and Part-Time For Economic Reasons as a Percent of the Civilian Labor Force and Marginally Attached Workers' by the Bureau of Labor Statistics. That unemployment rate is called the U6.

The U6 rate is currently 13.0%, essentially twice as high as the stated and publicly proclaimed rate. The substantially higher number is more satisfying to many as it seems to provide a proof that things are worse than they appear on the surface. I suppose if you are in this number, things indeed are worse than they appear.

However, the truth is that today’s 13.0% is substantially lower than the peak of 18.0% in March 2010 but still higher than the pre-Great Recession figure of 9.0%. The point is that the trend is favorable in that even this measure of unemployment is trending lower and it is much lower than it was 46 months ago.

Sometimes people ask what the U6 rate was in the Great Depression of the 1930s. The answer is that the U6 did not exist then, but the methodology of that time would at least compare favorably with the U6 of today. The 1930s say unemployment reached 25%, the Great Recession reached 18%.

The bottom line is that things are getting better, and that readers should look for areas in their companies that will inhibit growth in the years to come. It is time to get busy looking forward and to stop looking at conversational, but questionably useful, indicators like either the standard or the U6 unemployment rate.

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