NEW YORK ( TheStreet) -- The unemployment rate might be making headlines, but some economists say investors may be better advised looking at a different metric: the employment-to-population ratio.

The employment-to-population ratio, or EPR, measures the number of working-age people who have jobs as a percentage of total number of people aged 16 years and above.

"The employment-to-population ratio is like capacity utilization ratio," said Patrick O'Keefe, of J.H. Cohn and former deputy assistant secretary at the Department of Labor. " It measures how our potential workforce is being utilized."

It is superior to the unemployment rate, which O'Keefe says has "too many moving parts."

The unemployment rate counts only those workers who are actively seeking jobs. It does not count discouraged workers -- those who want and are available for work but have not sought a job in the last four weeks. As the economy recovers and more job openings are created, previously discouraged workers start applying for jobs and start to get included in the unemployment count.

There were 1.3 million discouraged workers in December, according to the household survey, all of whom could potentially re-enter the workforce as the economy recovers.

That means a spike in the unemployment rate is quite likely even as job growth accelerates, which makes it a rather unreliable indicator of where the economy is headed.

"We know from the household survey that the number of discouraged workers is extremely high," says O'Keefe." Over the course of 2011, assuming expansion in the economy goes according to script, unemployment will drift lower, but the rate will finish above 9% as new entrants enter the workforce."

Unemployment

Assessing the employment situation based on the unemployment rate can be tricky. Take the latest drop in unemployment, for instance. The number of underemployed dropped by 556,000 to 14.5 million last month partly because more people found employment but also because the labor participation rate unexpectedly dropped.

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