You flip on the nightly news and the news anchor says the current unemployment rate is 9.7%. Is that the true rate? What are the implications to the economy? Full employment in the U.S. has been considered to be 5%, but of course the rate is currently almost double.

There is a term called structural unemployment that is creating jobless recoveries and having a direct impact on the U.S. economy driven by consumption. Structural unemployment results from a mismatch between the skills and training of workers seeking employment and needs of employers. China, India, Brazil and Vietnam have created a global labor market where U.S. clerical and office jobs have been outsourced. Automation is reducing the need for workers in many industries. Many of these job losses do not show up in the headline unemployment currently at 9.7%.

In the future, more emphasis will be placed on the U-1 to U-6 spectrum of unemployment rates released by the Bureau of Labor Statistics (BLS).


Unemployment Measure

May 2010 Seasonally Adjusted

U-1: Persons unemployed for 15 weeks or longer, as a percent of the civilian labor force

5.8%

U-2: Job losers and persons who completed temporary jobs, as a percent of the civilian labor force.

6.0%

U-3: Total unemployed, as a percent of the civilian labor force
(official unemployment rate).

9.7%

U-4: Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers

10.3%

U-5: Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force

11.0%

U-6: Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force

16.6%

(Source: www.bls.gov)

If one currently combines all these categories, the real unemployment rate is not 9.7%, but 16.6%, or about one in six Americans.

These figures will be closely watched to ascertain the health of the U.S. economy and possible decisions by the Federal Reserve, as well as political implications next fall and beyond.

Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.