The official U.S. unemployment rate fell again in March to a pandemic low of 6% after the U.S. economy created 916,000 jobs, the Labor Department reported Friday, but the real level of joblessness is much higher.
How much higher? Economists estimate the true level of unemployment is likely a touch 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 haven’t looked for a job recently — 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 drop out of the 164 million-strong labor force.
Even now, nearly 4 million are still missing. They aren’t counted in the jobless rate.
Another smaller but persistent problem: Some people keep telling the government they still have a job even though they are not actually working.
Most likely these are workers who think they are going to return to their old jobs soon, even if they may no longer be available. If they classified themselves accurately as unemployed, that would also raise the official unemployment rate slightly.
“When adjusting for people that have dropped out of the labor force and the lingering misclassification, the unemployment rate remains around 9%,” according to lead U.S. economist Lydia Boussour of Oxford Economics.
A broader measure of unemployment compiled by the government, known as the U-6 rate, suggests it could be even higher.
The U-6, which rate fell to 10.7% in March, includes people who stopped looking for work in the past year as well as those who can only find part-time jobs.
If the economy keeps adding jobs at March’s pace, both the official and real level of unemployment are sure to keep falling. Yet it’s going to take a long time to return to the the 3.5% rate that prevailed before the pandemic, when unemployment hit a 50-year low.