Explaining the Unemployment Rate

There's a lot of idiocy floating around on all sides of the political spectrum about what the "real" unemployment rate is.

So, facts. First, when judging the usefullness of any measure, you have to consider its purpose. A screwdriver does not make a good hammer, but that doesn't mean it's a bad tool, just that you're using it wrong. The Unemployment Rate is meant to be a measure of how available labor is being underutilized. Note the word "available." If you are not looking for work, then you're not available for work because how could you be hired? How are employers supposed to know you're there? Since this is the main purpose of the measure, the international standard is that a person is unemployed if they are currently (within the last 4 weeks) actively looking for work, and are available to start work. If you are waiting for recall from a temporary layoff, you do not need to have been looking for work. If you are on the Union rolls, that counts as looking for work.
This is the definition used since 1967. There was one change in 1994 requiring that people starting a job still had to have looked in the previous 4 weeks.

Receiving Unemployment Benefits has NEVER been a requirement to be counted as Unemployed.

While this standard serves its purpose, it is useful to look at different components of the picture as well. For all measures, the Universe we're dealing with is the Adult Civilian Non-Institutional Population. In other words everyone 16 years or older (it used to be 14), not in the military (domestic military was included in an alternate measure in the '80's) not in jail/prison or in a mental hospital or any other long-term institution.

Every month, 60,000 households are surveyed with the reference week being the week of the month containing the 12th.

Employed are those who worked at least one hour for pay or more than 15 hours as an unpaid worker in a family business.

Unemployed are those who did not work for at least one hour, were available for work, and had looked for work in the previous 4 weeks.

Everyone else is considered "Not in the Labor Force" because they are not actually participating in the Labor Market.

However, there are some subsets of the Not in Labor Force that are important to look at. The Marginally Attached (a group first defined in 1994) are those who did not work, did not look for work in the past 4 weeks, but want to work, are available to work and have looked in the last year.
A subset of the Marginally Attached are "Discouraged Workers" who did not look specifically because they didn't think they could find a job they could get. The difficulty with these two is that they are very subjective, but they are useful to look at becuase if the economic situation changes, these are the people who can fill in available labor needs.


For the Employed, underemployment is also something that bears watching, though it's nonsensical to say that someone with a job is "Unemployed." As part of the interview, people who work part time are asked if they would prefer to work full time and why they are not. "Part Time for Economic Reasons" means either that the person usually or used to work full time, but had hours cut due to slow or slack work or that the person could not find any full time employment. "Part Time for Non-Economic Reasons" are those who work part time for child-care, commuting, or other reasons not having to do with employment availability.

On the other hand the official definition can also be too broad and special groups bear looking at. So there are 6 published measures of Unemployment:
U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force
U-2 Job losers and persons who completed jobs, as a percent of the civilian labor force
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)
U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers
U-5 Total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers
U-6 Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers

In the current conditions, I'd suggest that U-1 and more importantly U-2 are worth looking at.

Bureau of Labor Statistics Handbook of Methods Chapter 1 deals with Unemployment.
Historical Perspective Published in 1984, the redesign mentioned occurred in 1994
Technical NotesMore detail than the Handbook
Redesign of Alternate MeasuresExplains the changes in alternate measures.

is that the unemployed number is really higher than being reported because it doesn't count those people that have tapped out their unemployment compensation and have dropped off the rolls. I heard that the unemployment numbers that were being reported where in fact higher than was being reported - because if they would have reported the real unemployed - BushCo would have looked even worse. I interpreted that BushCo fostered this reporting because it was more favorable to them.

You seem like you have a good appreciation of Unemployment Reporting. Could you please comment on my interpretation of what I was reading here the last 8 years? Was there any truth to the fact that the numbers of unemployed were being under-reported?

Whether or not someone is or ever has collected UI is irrelevant to the Unemployment Rate. There have also been no real changes to the Current Population Survey under President Bush (maybe a minor change I'm forgetting). But in any case the President (whoever it is) has no say or involvement in the numbers. Nobody outside the Office of Employment and Unemployment gets to see the numbers until release except for the Commissioner of the Bureau of Labor Statistics, the President (and staff) and the Sec Labor and they don't get it until the night before. The Commissioner is the only political appointee, is almost always an academic, and is appointed across Presidential terms...meaning the current Commissioner won't be replaced for another 2 years.

I've heard people claim the government stats are "rigged" but nobody will ever say how exactly it's being done.

That would be any normal President.

We must remember that the bu$h regime was a machine working as one unit to make sure that one department didn't do anything to cause the President any bad press.

The bu$h regime had their fingers in everything including reports released to the public. Employment reports were treated the same as intelligence report, reviewed and gleaned for only information that would show the regime in the best possible light.

The President did NOT have access and certainly no control over the output. Whoever told you different is lying.