CLAYTON, N.C. ( TheStreet) -- The U.S. Department of Labor (DOL) announced the unemployment data for July this morning. The headline number is the official unemployment rate, U-3, which came in at 9.4%, down from 9.5% in the last report at the end of June.The official unemployment rate is determined by a body count. It does not differentiate between a person who works a full work week (nominally 40 hours), a reduced full-time work week (say 35 hours) and someone who works part-time (less than 35 hour per week). If the unemployment rate was calculated from total hours worked, the DOL data would produce an unemployment rate of 14.3%, defining a full work week as 40 hours. This is a decline from 14.5% for June. In determining the real unemployment rate, those who work part-time by choice are deducted from the 40-hour calculation. The U.S. Department of Labor designates these people as "part-time for non-economic reasons." These people are presumably working as much as they want. Therefore, I count each of these folks as an equivalent to full-time employment for the purpose of calculating the extent of unemployment. All other part-timers "for economic reasons" -- reduced-hours full-time employees -- are counted fractionally, depending on what part of the 40 hours they work. The term "part-time for economic reasons" covers those who want full-time work but could find only part-time positions or have had their formerly full-time hours cut to less than 35 hours per week. The factors used in calculating the real unemployment rate are listed in the following table, with data from today's DOL report compared to the previous report in June:
- The uncertainty in each of the numbers is of the order of +/-300,000. This means that a small change of 0.1% in the unemployment rate is well within measurement error uncertainty.
- The number of jobs lost (257,000) was dominated by a large increase in part-time employment (420,000). The part-time employment change included 125,000 more involuntary part-timers (part-time for economic reasons). This indicates employment may still be degrading.
- The average work week increased to 33.1 hours. This indicates employment may be improving.
- The labor force shrank by more than the measurement error. This is the largest contributor to the decrease in the official unemployment rate to 9.4%. If this is due to an increase of the permanently discouraged dropping from the labor force, it is an indication that employment may still be degrading.