RECENT JOBS STAT CALLS FOR NEITHER COMPLACENCY NOR CYNICISM

According to the Bureau of Labor Statistics (BLS), the U.S. economy generated a whopping 336,000 jobs during the month of September. That number far exceeded what most prognosticators had been predicting and, furthermore, it reversed the previous month’s slowdown in job growth. And, by the way, the aggregate unemployment rate held steady at the relatively low rate of 3.8%.

These data are undoubtedly supportive of the claim that the labor market, while not fully healed, is in far better shape than it was just a few years ago; it’s important to remember that, during the Covid-19 induced recession, the aggregate unemployment hit a high of almost 15%, the White unemployment rate reached 14.1 (now down to 3.4%) and the Black unemployment soared to 17% ( now down to 5.7%)

This context is important because, for one thing, progressives ought to be extremely careful that their critiques do not lend support to the false narrative that the economy is in shambles. This is the message of the right wing “populists” out here and it’s part and parcel of their strategy of greasing the wheels for the rise of a Trump-like figure to the presidency, if not the return of the Strong Man himself.

At the same time, though, it’s ludicrous to pretend as if we’re in some kind of economic sweet part that’s bereft of labor market misery and the human suffering that goes along with it. Even a relatively low unemployment rate of 3.8% means that 6.3 million are jobless.

So, while the unemployment rate is an important metric to track, it’s important to note that is has historically underestimated the extent of labor market distress or misery.

Fortunately, the Bureau of Labor Statistics produces an alternative metric of the state of the labor market. Known as “U-6,” this stat is rarely commented on in the mainstream media, although—as just mentioned— it’s also produced by the same governmental agency that generates the monthly unemployment rates that regularly grabs top billing.

The practice of singularly focusing on the official unemployment rate is one that ought to be abandoned. The failure to do so results in a portrayal of the health of the labor market that’s truncated and, therefore, misleading.

Case in point: People—and very powerful ones, at that— are prone to point to our current unemployment rate of 3.8% as incontrovertible evidence that the labor market is close to, if not already, running too hot. Hence, the calls from some quarters on the supposed need for austerity measures and tightened interest rates to “cool” the labor market off.

The Bureau of Labor Statistic’s alternative metric, though, makes it abundantly clear that there’s much more slack in the labor market than the official unemployment rate suggests.

AN ALTERNATE MEASURE OF THE HEALTH OF THE LABOR MARKET: THE BUREAU OF LABOR STATISTICS’ U-6 METRIC

To use BLS speak, the official unemployment rate is known as U-3. Importantly, this rate only counts you as “unemployed” if you a) are jobless and b) have actively searched for a gig within the past four weeks.

More pointedly, the official rate—U-3— excludes those that the Bureau of Labor Statistics dubs “marginally attached” to the labor force. The “marginally attached” consist of jobless folk who a) want a job, b) are available for work, and c) have looked for employment within the last 12 months but not within the past four weeks. Also, people who are working “part-time involuntarily” are excluded from the official metric of unemployment. As the name suggest, these are people who are working part-time but who, in fact, want full-time employment.

As mentioned above, the most recent Jobs Report estimates that the current unemployment rate is 3.8%, with 6.8 million people being counted as unemployed. That same Report, though, tallies 736,000 persons as “marginally attached” to the labor force. It also counts 4.1 million who were working “part-time involuntarily.”

And herein is the difference between the official unemployment rate (U-3) and the BLS’s alternative rate of U-6: The alternative metric adds together the 6.3 million officially unemployed, the 736K “marginally attached” folk, and the 4.1 million people working part-time but wanting a full time job.

That adds up to about 11.1 million people, 63% higher than 6.8 million people who yield an unemployment rate of 3.8%. And while the official unemployment rate indicates that less than 4% (3.8%) of the civilian labor force is unemployed, the BLS’s alternative metric estimates that currently 7% of the civilian labor force is either unemployed, “marginally attached” to the labor force, or “working part-time involuntarily.

NEITHER COMPLACENCY NOR CYNICISM

All of this (and more) is captured in the graph below. And if there’s a message in this graph—and I’m convinced there is— it’s this:

Neither complacency nor cynicism is called for. First, a word on cynicism: The graph shows that both indices — U-3 and U-6— have fallen like all get out from the high points they hit during pandemic induced recession: The official unemployment rate went from 15% to 3.8%, while BLS’s alternative metric dropped from 23% to 7%.

It is simply not true that the labor market is still in shambles. That is lie that needs to be rebutted and, moreover, it’s a falsity that’s relentlessly pushed by the apostles of austerity and foes of any semblance of democracy.

But—and here’s the final word— there’s no need for complacency. The official unemployment rate consistently underestimates the extent of real distress in the labor market; U-6, as the graph illustrates, is consistently above U-3 (the official unemployment rate).

If there’s hope for building an economy that respects all of creation—and I believe that there is— it’ll only come to fruition if people of good will successfully navigate the course between complacency and cynicism.