U.S. Unemployment Rate Either Falls to 7.8% or Increases to 23% — Depending on Whom You Ask

October 8, 2012 by 2 Comments

The U.S. unemployment rate has been coming down – albeit slowly – since December, 2009. Image Credit: Bureau of Labor Statistics

With a bit of fortuitous timing for the Obama administration, the U.S. unemployment rate dropped by four-tenths of one percent in September of this year, falling to 7.8% — the lowest rate since January, 2009. The brightening of the employment picture was credited to a government survey which showed that despite a relatively modest 114,000 jobs created in September, 873,000 more people were employed. The disparity in figures was attributed in part to a likely greater degree of job creation in previous months than previously indicated.

The decrease in the unemployment rate was the largest by percentage since a similar .4% drop in January, 2011.

The dramatic decline in the official unemployment rate bolsters the re-election prospects of President Obama just days after his soporific performance in the first debate against Republican challenger Mitt Romney. Conspiracy theories notwithstanding, the strong dose of good news for both Obama, and the U.S. economy as a whole, begets the following questions: how is the official unemployment rate determined and what are the significant factors involved?

Official Unemployment Rate Assumptions

In assembling its sample sizes, the Bureau of Labor Statistics performs monthly surveys of 60,000 households and 141,000 businesses and government agencies, covering approximately 486,000 establishments. Known as the U-3 population, the household survey consists of the “civilian noninstitutional population age 16 and over,” with the payroll survey including “nonfarm wage and salary jobs.”


Key to the calculation is that the statistics for underemployed people (those working below capacity) are not adjusted, and unemployed individuals not presently looking for work are not counted. Utilizing those measurements, peak employment reached nearly 147 million in December, 2007, before declining to a low of 138 million by August, 2009, nearly coinciding with the government’s official characterization of the recession lasting from December, 2007 through June, 2009.

Using the defined subsets, the calculation is straightforward: 16+ years old and looking for work divided by the total nonfarm labor pool, exclusive of the military. Under that measurement, unemployment has fallen from a peak of 10% in October, 2009 to the present rate. Approximately three million jobs have been created over the past three years.

Click to Read Page Two: The U-6 Unemployment Rate

Pages: 1 2 3

Filed Under: Economics, Headlines Tagged With: , , , , , ,
  • wyatt buchanan

    Let’s talk facts not rhetoric.
    25 million Americans are without full-time work. Over 5 million have been out of work for 27 weeks or more. The share of the unemployed who have been out of work for a year or more has soared from 12 percent three years ago to over 30 percent today. The share of the population actually in the labor force has shrunk to a post-World War II low. Almost 8.5 million people have given up looking for a job, so they are not counted in the unemployment rate because they have not searched for work in the prior month.

    The real unemployment rate is 15 percent, measured by what is called U-6, which includes people who are working part-time on an involuntary basis. We have 4.7 million fewer jobs than the peak reached at the end of 2007. And indeed much of the improvement in jobs has been through dubious “seasonal” adjustments, such as the July seasonal bump of 377,000 jobs—the largest such adjustment for July in the past 10 years. The labor participation rate has dropped to a 30-year low, and if not for that development, the unemployment rate would be much higher.

    Fewer Americans are at work today than in April 2000, although the population has grown by 31 million since then. A worker between the ages of 50 and 61 who has been unemployed for over a year has only a 9 percent chance of finding a job in the next three months. A worker who is 62 years or older and similarly unemployed has about a 6 percent chance. And 50 percent of this year’s college graduates are without jobs or are underemployed. What a waste.

    Four more years of this administration and our country will collapse from within. There has been no new hope and the change has been for the worse.

  • Walter McLaughlin

    Actually, although I presented both sides of the debate and I wasn’t taking a political position, the concepts of both U-6 as well as SGS were featured in the article. Some of my statistics differ from yours, but the concepts are the same.

    I don’t see this as a single administration’s issue. The underpinnings of where we are today started decades ago, and in my view, both political parties are to blame.

    Thanks for reading and contributing. Your information is definitely sobering.