How Many Are Out of Work, Really?

The official unemployment rate from the U.S. Department of Labor for May is 9.4%, the highest in more than 26 years. This is the so-called U3 rate and is the most widely quoted unemployment number in the media. But there are two other numbers that are often analyzed.

The U6 unemployment rate, also called the Bureau of Labor Statistics Broadest measure, includes a larger number of marginally attached, or "discouraged," unemployed in the labor force. The other is the Shadow Government Statistics alternative, or SGS, which uses techniques that correct what John Williams, a specialist on government economic reporting, has defined as flaws in current measurement techniques used by the government.

The three measurements of unemployment are shown in the following graph, from Williams' shadowstats.com.

Unemployment Rate Shadowstats.com

The latest data shows 16.4% U6 unemployment (the Labor Department uses the euphemism "underemployment" for this number) and the Shadow Stats unemployment number is above 20% for May.

But what is a fully employed person? I say the definition is someone working 40 hours a week. So if a person is working 30 hours a week, I would define that person as 75% employed. If I consider a hypothetical labor force of 100 people, and if 75 were working 40 hours a week, my definition would be that there was 25% unemployment. If 100 people work 30 hours a week, that is also 25% unemployment. Again, it might be referred to euphemistically as underemployment. But I'll go for the stronger term of unemployment.

For as far back as the Federal Reserve Economic Data base at the St. Louis Fed goes -- to 1964 -- the average weekly hours per worker in private industries has always been less than 40 hours. The number has been in decline for more than 40 years, with dips noted in recessions. The latest number for May 2009 is 33.1 hours a week.

Average Weekly Hours U.S. Dept. of Labor