America's Real Unemployment Rate - It's Not As Healthy As It Appears

Updated December 2016

I haven't posted on this subject for some time so I thought it would be a good time, in the interest of accuracy, to look at the real unemployment rate in the United States.

The Economic Policy Institute publishes a monthly assessment of the real state of unemployment in the United States by including "missing workers".  EPI defines missing workers as:

"...potential workers who, because of weak job opportunities, are neither employed nor actively seeking a job."

As we know, the world that the Bureau of Labor Statistics lives in, Americans are excluded from the U-3 headline unemployment rate if they aren't actively looking for work.  It excludes those former workers who have given up searching for a job, casting them aside as though they really don't matter in the grand scheme of things.  EPI feels that these "missing workers" are key to a better understanding of the real strength of the economy because, if the economy was stronger, they would actually be looking for a job.

Using the most current data available (to October 2016), EPI estimates that the total number of missing workers in October 2016 was 2,090,000.  Here is a graph showing how the number of missing workers has remained at significantly elevated levels in the seven years since the end of the Great Recession:

Here is a graph showing how the U-3 unemployment rate compares to the unemployment rate when the aforementioned missing workers are included:

When missing workers are included, the unemployment jumps to 6.1 percent, well above the low of 4.0 percent seen back in December 2006 before the Great Recession took hold and 1.2 percentage points or 24.5 percent above the headline U-3 unemployment rate.

Missing workers have an interesting age demographic as shown here:

It is quite concerning to note that the largest percentage of missing workers fall between the ages of 55 and 64; these are the years that many workers are doing their final saving for retirement.  The missing workers that fall between the ages of 45 and 54 are also of great concern since these are the prime earning years for millions of Americans.

While there is no doubt that the economy has improved, at least 2 million missing workers are feeling like the recovery since the Great Recession has passed them by.  Despite the Federal Reserve and its comments on the strength of the job market in the United States as is telegraphed by the monthly U-3 unemployment number, it is quite apparent that the economy simply isn't strong enough to put millions of discouraged unemployed Americans back to work.