The unemployment rate jumped from 5.0% to 5.5% in just one month, the largest jump in 22 years. Did everyone suddenly get laid off? No. The problem with numbers like this is that they are incomplete.

The one factor left out of the headline is the number of people who are considered to be in the workforce -- either with a job or actively seeking a job. For the past five months, the number of people with a job has declined, but the unemployment rate barely budged because so many people gave up and weren't considered part of the workforce. Last month, about 400,000 people re-entered the workforce; combined with 49,000 lost jobs, that caused the surge.

The real problem is in the long-term numbers. Note the chart below:

This chart shows the percentage of adult Americans who have a job, from 1948 to the present. Notice that the chart generally rises when the economy expands and falls during a recession (with a slight lag). Notice also that every peak over the last 45 years is higher than the previous peak -- except one.

The federal Bureau of Labor Statistics (BLS) released their latest employment figures today, and they continue to be disturbing. According to the BLS, the economy only added 92.000 jobs last month, and the unemployment rate edged up from 4.5% to 4.6%. But those numbers don't tell the whole story.

Actually, the real clue comes from the job creation rate, which continues to lag behind the number needed merely to keep pace with population growth. So if not enough jobs are being created, why isn't the official unemployment rate higher? It's because fewer Americans are considered to be part of the workforce.

Specifically, 63% of Americans 16 and older are officially in the workforce. That's down from a 64.25% average during the last three years of the Clinton administration -- a figure Bush has never been able to reach. These percentages translate into just over three million Americans whom the BLS considers to be "unpersons." Add those three million unemployed Americans into the mix, and the rate jumps from 4.6% to 6.4% -- and rising.

What's worse ...

Mark Twain said there are lies, damn lies and statistics and his adage applies to unemployment measurement. The Bureau of Labor Statistics (BLS) publishes six unemployment metrics monthly, each referred to in ascending order of inclusiveness of the unemployed as U-1, U-2, etc.

The measure reported by the media as the unemployment rate that severely undercounts the unemployed is referred to as U-3. The U-3 rate is obtained by dividing the narrowest definition of the unemployed by the work force.
The U-3 definition does not include whom the BLS calls discouraged and marginal workers, those who want a job but have given up the search because market conditions and personal experience indicate the process is futile.

U-6 Unemployment counts the marginal and discouraged plus those seeking full time employment but can only find part time work. The Federal Reserve tracks what it defines as the Augmented Unemployment rate, which I’ve read is equivalent to U-6 less part time workers. I couldn’t find any Augmented Unemployment releases on the Fed site and despite major data inclusion differences, some bloggers have used U-6 and the Fed’s stat interchangeably.