The unemployment rate for May was released this week – 9.4%. Pretty miserable but fortunately not as high as the10.8% we hit in the recession of 1982, right? Well, actually no. Dig a little deeper and a more negative picture emerges.
The reason is that 9.4% reflects the core unemployment rate defined as those unemployed who are available to work and have looked for a job in the last 4 weeks. The BLS calls that the U3 rate. But what if you add in all the workers who have stopped looking for work in the past 4 weeks because they’re convinced there are no jobs available anyway, (most laid-off assembly line workers in Flint, Michigan would fall into this group.) This is called the “marginally attached workforce” – workers who are able to work but have stopped looking for reasons such as lack of job availability, family responsibilities, ill health, or transportation problems. These workers aren’t factored into the BLS’s U3 calculation.
Then there’s a whole other group of workers who used to have full time jobs but have had their hours cut because of unfavorable business conditions. The BLS considers these involuntary part-timers as “employed”, EVEN if they’re working just 1 hour a week. But add them to the marginally attached group, who have stopped looking for work and suddenly the unemployment number shoots up to 16.4%. That’s significantly higher than the 15.3% seen in the ’82 recession, and the highest since 1941, the last year of the Great Depression. The BLS calls this number U6, and I believe it’s how we should be looking at unemployment. Only then will we have a true picture of how deeply the recession is hitting American families.