×

Unemployment is 4.6 percent, but a more realistic rate is higher

The national unemployment rate fell to 4.6 percent in November, the Labor Department said Friday. But relying on that one headline number as an indicator of the economy's direction ignores important information just below the surface.

Every month on "Jobs Friday," the Bureau of Labor Statistics releases a bunch of data, each point of which provides its own unique perspective on an aspect of the nation's employment situation. Economists look past the official unemployment rate — that 4.6 percent figure, also known as the "U-3" rate — to other metrics that give their own nuanced view of jobs in the country.

One of those figures is called the U-6 rate, which has a broader definition of unemployment than the U-3 does. In November, that figure fell two-tenths of a point, to 9.3 percent.

The official unemployment rate is defined as "total unemployed, as a percent of the civilian labor force," but doesn't include a number of employment situations in which workers may find themselves. The U-6 rate is defined as all unemployed, plus "persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of a labor force."

In other words: The unemployed, the underemployed and the discouraged.

The U-3 rate has in the past few months returned to the pre-recession levels that economists consider full employment. The U-6 has seen significant gains in recent months but remains higher than before the recession. The last time the U-6 was lower than 9.3 was August 2008.

Economists expected nonfarm payroll employment to increase by 175,000, according to Reuters.

One area of concern in recent years has been the labor force participation rate, which measures the portion of the population that's either employed or looking for work. The participation rate has fallen since the recession, likely due to demographic shifts like baby boomers retiring.

Some economists also think that workers are feeling discouraged and not actively seeking work. Others think there are more cyclical factors and even changes in the nature of the economy at work. Of particular concern is a decline in the participation rate for workers aged 25 - 54, which is the prime age range for workers.

In November, the participation rate fell slightly, to 62.7 percent.

As more unemployed Americans find work and the labor market tightens, one may expect wages to rise as employers compete with each other to attract the remaining qualified job candidates. In recent months, wages have gained ground after years of tepid growth. But many economists have worried that many of the jobs being added are low-wage, low-skill positions.

In November, average hourly wages fell 3 cents to $25.89. Average weekly wages were at $890.62.

This is the final jobs report before the Federal Reserve meeting in December. Analysts widely expect the Fed to raise rates amid the growing economy and tightening labor market.