The Unemployment Rate, Truly Explained

On Friday, we received a WTF(?!!?) type of jobs number from the Bureau of Labor Statistics. 

But how? Especially considering record setting corporate earnings and the ADP private sector jobs report -- which was the best in total since January and capped off by growing at 3 percent during the economy's second quarter.... What's the deal? 

Enter Friday's jobs number: 

  • The headline jobs number for August: 156,000 (second weakest of the year) 
  • Headline unemployment rate 4.4 percent (up a tenth)
  • Negative jobs revisions for prior months
  • Millions unaccounted for by the base reported unemployment rate
Source: BLS

One of these things doesn't look like the other (AKA all of the other economic indicators and this report). Expect positive revisions in future months. In the meantime...

Top industries for hiring: 

  • #1 Manufacturing! (added 36,000 jobs)
  • #2 Construction (added 28,000 jobs) 
  • #3 Professional & technical services (added 22,000 jobs)

So over the past two months, the BLS has positively revised jobs by 49,000. That's what has helped bridge the gap between the ADP private sector jobs report and the government numbers (which also includes government employment) 

Now let's take a look at the reported unemployment rate at 4.4 percent. This was up from 4.3 percent in July. As we know, that doesn't account for the long term unemployed. So each month I bring you the real unemployment rate.   

  • Government reported unemployment rate: 4.4 percent, 
    • Down from 4.9 percent (year over year improvement of 10 percent)
  • Actual: 8.6 percent 
    • Down from 9.7 percent (year over year improvement of 11 percent)

So here are three relevant points:   

1. When the long-term unemployed & marginally employed are factored in - the real unemployment remains nearly double the base reported rate  

2. 1.7 million are long-term unemployed, 5.3 million are underemployed (part-time seeking full-time work) & 1.5 million are marginally attached to the workforce

3. The labor participation rate was flat at 62.9 percent 

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