What Is the Real Unemployment Rate?

Does the Government Lie About Unemployment?

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The real unemployment rate includes people who have stopped looking for work because they are too discouraged. Photo: Getty Images

Definition: The real unemployment rate (U-6) is a broader definition of unemployment than the official unemployment rate (U-3). In July, 2017, it was 8.6 percent. The real unemployment rate includes the underemployed, the marginally attached and discouraged workers. 

The U-3 is the rate most often reported in the media. In the U-3 rate, the Bureau of Labor Statistics only counts those who have looked for a job in the past four weeks as unemployed.

The U-6 rate adds those who are marginally attached and discouraged. It also includes part-time workers who would prefer full-time jobs. For that reason, it is almost double the U-3 report.

The BLS issues both in each month's jobs report. Surprisingly, there isn't as much media attention paid to the real unemployment rate. But even Federal Reserve Chair Janet Yellen said it paints a clearer picture of true U.S. unemployment.

The U-3 rate only counts people without jobs who are in the labor force. These people have looked for a job in the last four weeks. The BLS categorizes people who have looked for work in the last year but not the last four weeks as marginally attached. For more, see Labor Force Participation Rate.

Among the marginally attached are the discouraged workers, who have given up looking for work altogether. They could have gone back to school, gotten pregnant or become disabled.

They may or may not return to the labor force, depending on their circumstances. Once they haven't looked for a job in 12 months, they're no longer counted as marginally attached. (Source: "Definitions," Bureau of Labor Statistics.)

The BLS includes part-time workers in the employment numbers. It asks whether they would prefer a full-time job.

Those people are considered underemployed.

Real Unemployment Rate Formula Using Current Statistics

In July 2017, the real unemployment rate (U-6) was 8.6 percent. That's double the widely reported unemployment rate (U-3) of 4.3 percent. Here's how to calculate both.

Step 1. Calculate the official unemployment rate (U-3).

U-3 = 6.981 million unemployed workers / 160.494 million in the labor force = 4.3 percent.

Step 2. Add in marginally attached workers. There were 1.629 million people who were marginally attached to the labor force. Add this to both the number of unemployed and the labor force.

U-5 = (6.981 million + 1.629 million) / (160.494 million + 1.629 million) = 8.610 million / 162.123 million = 5.3 percent.

Step 3. Add in part-time workers. There were 5.282 million people who were working part-time but would prefer full-time work. Add them to the unemployed with marginal workers. They're already in the labor force.

U-6 = (8.610 million + 5.282 million) / (162.123 million) = 8.6 percent. (Source: "Table A-15," Bureau of Labor Statistics.)

Compare the Real Unemployment Rate

To put things in perspective, here's the official unemployment rate compared to the real rate since 1994. That’s the first year the BLS collected data on U-6.

The rates given are for January of each year. To see unemployment since 1929, go to Unemployment Rate by Year.

Throughout the years, the official rate is a little more than half the real rate. That remains true no matter how well the economy is doing. Even in 2000, when the official rate below the natural unemployment rate of 4.5 percent, the real rate was almost double, at 7.1 percent. In 2010, when the unemployment rate was its highest at 9.8 percent, the real rate was still almost double, at 16.7 percent.

Year (as of January)U3 (Official)U6 (Real)U3/U6Comments
19946.6%11.8%56%The first year BLS reported U6
19955.6%10.2%55% 
19965.6%9.8%57% 
19975.3%9.4%56% 
19984.6%8.4%55% 
19994.3%7.7%56% 
20004.0% (Record Low)7.1%56%Stock market crashed in March
20014.2%7.3%58% 
20025.7%9.5%60%U3 closest to U6
20035.8%10.0%58% 
20045.7%9.9%58% 
20055.3%9.3%57% 
20064.7%8.4%56% 
20074.6%8.4%55% 
20085.0%9.2%54% 
20097.8%14.2%55%High of 10.2% in Oct
20109.8%16.7%59%  
20119.1%16.2%56% 
20128.3%15.2%55% 
20138.0%14.5%55% 
20146.6%12.7%52% 
20155.7% 11.3% 50% 
20164.9%  9.9%49%Both return to pre-recession levels
20174.8%  9.4%51% 

The point is to make sure you compare apples to apples. If you say the government is lying during a recession, then you've got to make the same argument when times are good. (Source: “Table A-1. Historical Household Data,” Bureau of Labor Statistics.)

Was the Real Unemployment Rate Ever as Bad as During the Depression?

The unemployment rate during The Great Depression was 25 percent. Unemployment rates were calculated differently back then, but this was likely similar to the real rate today. Did the real unemployment rate during the Great Recession ever reach that level? Despite what many people say, a simple calculation shows this is not true.

In October 2009, the official unemployment rate (U-3) reached its height of 10.2 percent. There were 15.7 million unemployed among 153.98 million in the labor force. Add to that the 2.4 million marginally attached, including 808,000 discouraged workers, and you get a U-5 rate of 11.6 percent. Then add in the 9.3 million part-time workers who preferred full-time, and you get the U-6 rate of 17.5 percent. That gives a better sense of 2009 unemployment.

Therefore, even if you stretch the definition of unemployed to include marginally attached and part-time workers, unemployment was never as bad as during the height of the Great Depression. But, unemployment wasn't that high throughout the entire Depression, which lasted for 10 years. If you wanted to make the case, you could say the real unemployment at the height of the Great Recession was as high as unemployment during parts of the Great Depression