The Real Unemployment Rate – September 2021


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Expectations were running high heading into Friday’s jobs Report. For the second straight month, there was lots of disappointment instead. You might ask where’d all of the workers go? We’re living in an increasingly weird world where employees are dropping out of the workforce in record numbers. The early pandemic catalyst had been the ability to do nothing and rack in unemployment checks that commonly were higher than compensation earned while working. More recently it appears vaccine mandates are leading to a new round of people throwing the towels in on their careers. What we’re witnessing is what happens when the government becomes a prominent player in the economy as opposed to free-market forces. It’s not good and that’s why we continue to see a falling unemployment rate despite not posting significant job gains. 

There’s always far more hiding beneath the surface of the headline numbers than not so we’ll dig in. Starting with the headline numbers. The unemployment rate is now 4.8%. We've added over 194,000 jobs and had positive revisions from previous months totaling 169,000 jobs. The net-net of it all is better than the headline number suggested. Because the government was way off in previous months there were nearly as many jobs previously added but unaccounted for, as the gains during the month itself. The net number of 363,000 is still disappointing but much less so than the headline number.

Now, the reported base rate and the real unemployment rate are two separate things. The real unemployment rate once underemployed, long-term unemployed, and marginally attached people are accounted for is actually 8.5%.

The best news in the report showed up with the real rate as we did make real progress with those not accounted for by the base unemployment rate. There are currently 8.9 million people who are long-term unemployed, underemployed, or marginally attached to the workforce which makes up the difference between the base rate and the real rate. That’s an improvement of 400,000 over the previous month and is the big storyline in this report. 

As for Demographics, the unemployment rate improved for Blacks and Whites while essentially flat for all other demographics. Furthermore, the average hourly wage rose by 19 cents per hour during the month to $30.85. The average full-time income is currently $55,826, an increase of $377 over the prior month.

The good news for those who are full-time employed is that wage inflation continued positively impacting the incomes of those full-time employed as we ended the month with record-high average annual incomes. That’s especially important given the 30+ year highs we’re seeing for inflation currently. While the headline numbers were disappointing, the story beneath the headlines was far more positive.

The biggest gains in employment have most recently been made by those who’re long-term unemployed and those who’ve been struggling to gain regular employment. There are still many challenges for would-be employees and employers alike, however, the overall employment picture over the past month was far better the deeper into the data you dig. 


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