The Real U.S. Unemployment Rate as of Early 2009

Excerpted from “Notes From the Editors”,   Monthly Review, April 2009
(The Editor of Monthly Review is John Bellamy Foster)

It is now universally recognized that the U.S. economy is experiencing a deep downturn unlike anything seen since the 1930s. Hence, the question continually arises: How close is this to a depression? One way of answering is to look at the unemployment rate. The Great Depression hit bottom in 1933 when unemployment peaked at 25 percent. Today the United States is losing jobs at the rate of 600,000 a month. But the official unemployment rate currently stands at 8.1 percent (seasonally adjusted, February 2009). This is the highest rate of official unemployment in a quarter-century, but hardly what is considered a depression-level rate, which is usually thought of as well into the double-digits.

However, it is increasingly apparent that the official unemployment rate is much too conservative in its measure of labor underutilization, causing some of the better economic analysts to place their emphasis on the most inclusive unemployment rate provided by the Bureau of Labor Statistics (BLS), known as the U-6 measure, as opposed to U-3 (the official unemployment rate). U-6 is comprised of three components: (1) The “officially unemployed,” or U-3, those who are jobless and have looked for work in the past four weeks. Plus (2) “marginally attached workers,” or jobless individuals who desire employment and have looked in the past year but are not presently looking. (This includes as subcategories: [a] “discouraged workers” who consider the job market effectively closed to them; and [b] all other marginally attached workers, who often point to structural reasons for not pursuing employment, such as lack of childcare or transportation.) Plus (3) those “part time workers” who are part time for economic reasons and desire full-time employment. (John E. Bregger and Steven Haugen, “BLS Introduces a New Range of Alternative Unemployment Measures,” Monthly Labor Review 118, no. 10 [1995].) The U-6 unemployment rate is currently at 16 percent (non-seasonally adjusted, February 2009).

U-6 is clearly the most developed measure of the real unemployment rate. As Paul Krugman has argued, “the official unemployment rate [U-3] has been a poor guide to the reality of the labor market in recent years,” while U-6 is to be preferred as a more comprehensive measure (“Labor Market Deterioration,” New York Times blog, April 5, 2008). Still, it is worthwhile to note how far U-6 itself is from measuring labor underutilization. Some of the limitations of U-6 include the failure to account for the effects on unemployment figures of large numbers of people on Social Security disability, and a high incarceration rate (which falls on populations with a disproportionately high rate of unemployment). Both of these arguably represent forms of “hidden unemployment” (See Hasmet M. Uluorta, The Social Economy [New York: Routledge, 2009], 48-49.)

Indeed, dissatisfaction with the unemployment series, whether U-3 or U-6, has caused some analysts to turn to a separate measure sometimes known as the “jobless rate” (not to be confused with the colloquial use of the same term to refer to the unemployment rate). This is defined as the percentage of the civilian non-institutional population ages 25–54 (or prime working age) without a job. Since women’s labor force participation has changed radically in the last thirty years, drastically affecting these numbers, direct comparisons between the official unemployment rate and the jobless rate usually focus on men.

The important fact is that although fluctuations in the unemployment and jobless rates for men followed each other closely until the 1980s, after that the unemployment rate fell while the jobless rate increased, widening the gap between the two. At present there is a 10 point gap between the two rates (with the unemployment rate for men in February 2009 at 8 percent and the jobless rate for men at 18 percent). This compares to about a 3 point separation between the unemployment and jobless rates for men in the mid-1970s. In fact, today’s jobless rate for men is currently 12 percentage points higher than it was in 1948 when it was only 6 percent. The jobless rate for all workers (women as well as men) at present (February 2009) is 23 percent. Clearly, where men in particular are concerned, the percentage of the prime-age population that is jobless has risen dramatically, well into double-digit levels, even without considering the effects of part-time employment. (Bureau of Labor Statistics; Yoonsoo Lee and Beth Mowry, “Gender Differences in Employment Statistics,” Cleveland Federal Reserve Bank, May 13, 2008; Floyd Norris, “Many More Are Jobless Than Are Unemployed,” New York Times, April 12, 2008).

What does all of this add up to? Namely this: unemployment/underemployment in the U.S. economy is massive and growing rapidly—a fact which can no longer be disguised. To be sure, current measurements reflect the organization of labor markets in a capitalist society. Employers and government statisticians are mainly interested in how much slack there is in the economy and not in the level of human misery. Yet, a close examination reveals the depth of human misery as reflected in unemployment statistics is nonetheless profound. One out of every six workers is currently unemployed or underemployed according to the U-6 accounting. While close to one out of every four prime-age adults are jobless according to jobless rate calculations. Providing useful and (to the extent possible) rewarding employment for all is something that should be demanded of any economy. If the existing system cannot provide this, then reason and morality suggest that the underlying population should rise up and replace it with one that can.

          —March 6, 2009

Marxist Political Economy Home Page