US government says unemployment is at 4.9% — but here’s the real story

The national unemployment rate remained at 4.9 percent in August, the Labor Department reported Friday. But relying on that one headline number as an indicator of the economy’s direction leaves out a lot of important information.

Each month on jobs day, the Bureau of Labor Statistics releases a ton of data, each point of which provides a unique perspective on the nation’s employment situation. Most economists look past the official unemployment rate — that 4.9 percent figure, also know as the “U-3” number — to other metrics that provide their own views of the state of jobs.

One of those figures is something called the U-6 rate, which has a broader definition of what unemployment means. That figure remained unchanged in August, at 9.7 percent.

The official unemployment rate is defined as “total unemployed, as a percent of the civilian labor force,” but doesn’t include a number of employment situations in which workers may find themselves. The U-6 rate is defined as all unemployed, plus “persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the labor force.”

In other words: the unemployed, the underemployed and the discouraged.

The U-3 rate in the past few months has returned to the prerecession levels that economists refer to as full employment. The U-6 rate has remained stubbornly above prerecession levels, though it has shown significant improvement in the past few years.

Market observers were watching this month’s jobs report especially closely for evidence that would support the Fed to raise interest rates at their September meeting. Fed Chair Janet Yellen suggested last Friday in Jackson Hole, Wyoming, that with sustained improvements in the economy, interest rates would likely go up.

Economists expected 180,000 jobs added in August as evidence of that sustained growth. The report, however, found that the market added 151,000 jobs.

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