When I turn on the news these days it seems that there are few reasons to smile, but I have to say- the consistent Unemployment Rate decrease has been a steady source of satisfaction for me.

That is until today- when I found out that the Unemployment Rate is basically just a made up number.

I mean not really, but the Unemployment Rate is not, in any way, an accurate representation of the percentage of the U.S that is actually unemployed.

The Official U.S Unemployment Rate

“People are classified as Unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.” -bls.gov

So, there are 3 conditions that must be true in order to meet the official definition of Unemployed. If you haven’t actively searched for work in the last 4 weeks (maybe you’ve been in school or maybe you’ve been looking online but haven’t applied for a job yet) you don’t count as Unemployed according to the official definition. You don’t get counted as employed, obviously, either. You actually don’t get counted at all.

Data from bls.gov

This is very good. Regardless of the relevance of the number, a low Unemployment Rate is better than a high Unemployment Rate.

The Unemployment Rate has been declining for years and the trend looks like it will continue. Even if the number is not representative of the total Unemployed population, the steadily declining trend is a good thing.

Labor Force Participation Rate

A much better indicator of the total portion of the population that is actually unemployed is the Labor Force Participation Rate.

According to the BLS, the Labor Force Participation Rate defines the “Labor Force” as everyone eligible to work (all people over the age of 16 who are not in jail, in a nursing home, in some other institution, or in the Armed Services) and defines “Employed” as anyone who worked in the last week.

Anyone in the Labor Force who is not Employed is Unemployed, simple.

Data from bls.gov

So, 37% of the population could get a job but they can’t find a job or can’t get someone to give them a job because maybe they aren’t qualified enough.

That’s 37% of the population unemployed versus the 3.8% the government has been blabbing about for months now.

And before you go there, don’t. I like our government. I think for the most part we all do what we can to try and make things work. It’s hard, I get that.

What I don’t understand is the 33% difference between the “Unemployment Rate” and the percentage of people who are unemployed. Like, what’s the point of the Unemployment Rate if it isn’t going to tell us within some degree of accuracy how many people are looking for work?

The most important initiative that we can undertake is to prevent people from getting to month 7 of unemployment.

On a brighter note, the chart produced (below) by the Bureau of Labor Statistics does show that the Labor Force Participation Rate, which I deem to be the real indicator of unemployment, has been recovering since the 2008 financial market crash. As my friend Joe Psotka helped me analyze, the red line on this chart depicts that the % of the population that is employed- so if it goes down, that’s not good. When goes up, more people are employed.