The official US unemployment rate fell again in March to a pandemic low of 6% after the US economy created 916,000 jobs, the Labor Department reported on Friday, but the actual level of unemployment is much higher. How much higher? Economists estimate that the real level of unemployment is likely to be above 9%. And an obscure government measure of unemployment suggests it could be above 10%.
Let’s unpack this. The biggest problem with the official unemployment rate is that it excludes people who want to work but have not recently looked for work, that is, within four weeks of the government‘s monthly household survey. Normally the number is not extremely high, but the pandemic induced a whopping 8 million people to suddenly leave the workforce of 164 million people. Even now, nearly 4 million are still missing. They are not counted in the unemployment rate. Another minor but persistent problem: Some people keep telling the government that they still have a job even though they really aren’t. These are most likely workers who think they will soon return to their old jobs, even if they may no longer be available. If they were to accurately classify themselves as unemployed, that would also raise the official unemployment rate slightly. “When you adjust for people who have left the workforce and persistent misclassification, the unemployment rate remains around 9%,” according to leading US economist Lydia Boussour of Oxford Economics. A broader measure of unemployment compiled by the government, known as the U-6 rate, suggests that it could be even higher. Read: New jobless claims rise to 719,000, but a likely temporary peak The U-6, whose rate fell to 10.7% in March, includes people who stopped looking for work last year, as well as those who they can only find part-time jobs. . If the economy continues to create jobs at the rate of March, it is certain that both the official level and the real level of unemployment will continue to fall. However, it will take a long time to return to the 3.5% rate that prevailed before the pandemic, when unemployment hit a 50-year low.