Most people understand that a low unemployment number is good for the country (though it sure doesn’t help you if you’re one of them!) The unemployment rate has been going down for months and it’s now less than 4%. That’s great! But did you know there is more than one “unemployment” number? What is this governmental metric madness?? 😱
Here are Five Fast Facts on unemployment data:
- 👍 The Most Commonly Used - There are actually six different unemployment metrics, referred to as U1, U2, U3, and so on. The one that most often gets the headlines is U3. It shows the number of people of working age who are actively looking for a job but don’t have one. The government started tracking it back in the 1950s. Picket fences are not a part of the calculation.
- ☑️ The Most Meaningful - While U3 might get the splashy headlines, many economists think U6 is a much better number to look at. It includes U3, along with discouraged, underemployed, and unemployed workers. A couple examples would be someone who has a part time job because they can’t find a full time one, or someone who has looked for long enough without finding a job that they have just given up. It’s a better big picture view of everyone who isn’t working in the country. A grim picture, yes, but a more accurate one.
- 📝 The Others - The other unemployment metrics show things like people who have been unemployed for certain long periods of time, those coming off of temporary jobs, and other combinations. Basically, variations that only economists would get excited about.
- 🤔 The Gap - The gap between U3 and U6 unemployment varies, of course, but is usually about 3-4% different, with U6 being higher. At the height of the pandemic in 2020, U3 was 14.7% (that’s what we saw in the headlines), but U6 was a whopping 22.9%! Currently, U3 is 3.5% but U6 is 6.7%. Changes the story a bit, doesn’t it?
- 📈 Where Is The Job Growth? - The good news is that there is job growth happening, and that’s what is driving both unemployment numbers down. Much of it is happening in the government itself, though - they’ve added an average of over 60k jobs each month this year, three times as many as last year. While it’s great that people are earning good Paychecks, doesn’t it seem a bit strange that the government itself is by far the biggest employer in the country (about 25% bigger than the biggest actual company)?
🔥Bottom line: The bean counters love their numbers and statistics. Much of the time normal folks don’t need to know all that. But, sometimes it’s helpful to know enough that we don’t just take the headlines at face value. Why do they report on U3 rather than U6 if U6 is the more accurate? We’re not sure, but it probably has something to do with the fact that U3 looks better, and politicians are all about the look.
Anyway, unemployment numbers are really important for understanding how our country’s economy is doing…but some unemployment numbers are more important than others.
What do you think about unemployment numbers now?
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