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U6 isn't the "real unemployment rate," it's just the loosest definition of "unemployment" that the BLS calculates. It's much higher than U3 because the definit
by jordanb 17y ago
U6 isn't the "real unemployment rate," it's just the loosest definition of "unemployment" that the BLS calculates.
It's much higher than U3 because the definition is so much more broad. It is also, of course, much higher than U3 in good times as well as bad.
The cartoon tries to assert that U3 is not valid because it excludes people not actively looking for work, etc. While it's true that there are deficiencies in U3 (and that is the reason why the BLS continues to publish U4/5/6), the primary purpose of U3 is to provide an economic indicator, so we can tell if things are getting better or worse.
U3 is a less subjective definition than U4/5/6 and is more reliant upon primary data, rather than data from sampling-based surveys. It's the broadest definition of unemployment for which the available data is very robust, and thus less likely to drift due to sampling problems. Robustness is a very important quality for an indicator, whose primary purpose is to be compared to itself at some other t.
U4/5/6 are important to keep in mind, but calling any of them the "real" unemployment rate is disingenuous. Any one of them would be inferior to U3 as "the unemployment rate indicator."
- joe_the_user 17y agoYour argument fails take into account the fact that the unemployment rate is a highly politicized figure in which the adjustments are by no means all for statistical accuracy. The discussion of employment and unemployment at the Shadow Government Statistic website gives a good overview of this topic. See http://www.shadowstats.com/ http://www.shadowstats.com/ (I've given the home page since they discourage deep linking - the article is at article/employment). Of course, the original Mint discussion was hardly better than the parent's argument.
- jordanb 17y agoMy "argument" is simply to state that U3 is a measure defined so that it can rely on population (not sampled) data. This is done precisely to reduce the amount of processes error and bias. The definition of U3 leaves little room for adjustment, and that is intentional. If you were worried about "manipulation," then U4/5/6 are much more open to manipulation than U3 is.
- ntoshev 17y agoAlso, the absolute number doesn't matter much; what matters is the change in relation to previous years / good times as long as methodology stays unchanged.