This commentary originally appeared in Forbes on July 2, 2015.
The U.S. Bureau of Labor Statistics (BLS) just released its latest employment report, announcing that the official unemployment rate declined to 5.3 percent with nonfarm payroll employment increasing by 223,000 in June. This is ostensibly good news for workers.
But, the official unemployment rate doesn’t measure millions of out of work or underemployed Americans who would like full time work. For that you need to look at U-6, the arcane BLS designation for “labor underutilization” that includes discouraged workers (those who haven’t looked for work in the last four weeks but had looked for work sometime in the last year) as well as people working part time but who want full time work, known as “involuntary part-time workers” in BLS parlance.
The broader measure of unemployment, the U-6 rate, was 10.5 percent in June, about double the official unemployment rate.
Long term unemployment is a growing problem in the U.S., with workers long-absent from the workforce becoming less and less employable over time. Welfare, long term unemployment benefits, and disability insurance are part of the problem, as potential workers compare the income stream from government assistance to work and make a practical decision that a job isn’t worth the effort.
In May, 2015, the BLS’ monthly state unemployment report showed that three jurisdictions with the highest unemployment rates were the District of Columbia, 7.3 percent, West Virginia, 7.2 percent, and Nevada, 7.0 percent.
But, if discouraged and underemployed workers were taken into account, what would the U-6 unemployment be? The states with the highest average U-6 rates over the past four quarters are Nevada, 15.3 percent, California, 14.7 percent, and Arizona, 14.3 percent.
The BLS even tracks the U-6 rate for Los Angeles County, estimating that fully one in six workers in California’s largest metropolitan area is unemployed for a 16.6 percent rate.
Labor force participation has yet to rebound from the Great Recession. Laws and labor rules put in place since 2008 have pushed more people out of employment, risking serious long term challenges for society as well as for government budgets.
Tracking labor force participation and the official unemployment rate shows a disturbing disconnect: even as the ranks of the unemployed declined after the recession, labor force participation continued to shrink as shown in the graphic below.
Tracking labor force participation and the official unemployment rate shows a disturbing disconnect.
Further complicating matters is President Obama’s recent promise to “…give a raise to 5 million people…” through new overtime rules enacted via executive order—as if government edicts can override the value of labor and productivity sans unintended consequences. The fact is that the White House’s new overtime rules will push more people out of the workforce, further swelling the ranks of people designated “U-6” by the Bureau of Labor Statistics.
Chuck DeVore is Vice President of National Initiatives at the Texas Public Policy Foundation. He was a California Assemblyman and is a Lt. Colonel in the U.S. Army Retired Reserve.