Unemployment rose in December, but a more realistic rate is even higher

The national unemployment rate rose a 0.1 point in December, to 4.7 percent, the Labor Department announced Friday. That's a slight increase, but relying on that one headline number as an indicator of the economy's general direction ignores important information just below the surface.

Every month on "Jobs Friday," the Bureau of Labor Statistics releases a slew of data, each of which provides its own perspective on the nation's employment situation. Economists look past the official unemployment rate — that 4.7 percent figure, also known as the "U-3" — to other metrics that give their own nuanced view of the 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 December, that number fell 0.1 point, to 9.2 percent.

The official unemployment rate is defined as "total employed, 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 the 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 prerecession levels that economists consider full employment. The U-6 has seen significant gains in recent months but still remains higher than before the recession. The last time the U-6 was below 9.2 percent was March 2008.

Nonfarm payrolls added 156,000 jobs in December, missing the consensus estimate of 178,000.

A rising unemployment rate isn't always a bad thing. For one, it can mean that more potential workers are coming off the sidelines because they think they're more likely to find work. That U-3 rate only measures people who are actively looking for work, not people who have given up looking. That's why the labor force participation rate is important — it measures the portion of the population that's either employed or looking for work.

The participation rate has fallen significantly since its high around the year 2000, likely due to demographic shifts like the 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 the participation decline among workers ages 25-54, which is considered the prime age range of employment.

In December, the overall participation rate remained unchanged at 62.7 percent.

As more Americans find work and the labor market tightens, you can expect wages to rise because of the competition among employers to attract the remaining qualified job candidates. In recent months, wages have again gained ground after years of tepid growth. But some economists have worried that many of the jobs being added are low-wage, low-skill positions.

Food service and drinking establishments continued to gain jobs, adding 30,000 in December. Only health care added more, with 43,000 jobs.

In December, average hourly wages rose 10 cents to $26. Average weekly wages were up to $891.80 from $888.37 in November.