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Comment by me2i81 | Hacker News Reader

The BLS puts out 6 different unemployment statistics for every period. U3 is the "official rate", but you can also look at the other ones, including U4 = U3 + "discouraged workers", U5 = U4 + "marginally attached" workers, U6 = U5 + part time workers who would like to be full time. You can make arguments about which measurement is "right", but putting out an editorial implying that there is sleight-of-hand going on is silly--all the measurements are available, and comparing a single one to itself over time as a "headline rate" is completely reasonable.

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Ha, I came here to make the same comment. Anyone who writes about the misleading nature of U3 without describing U6 exists, is a BLS reported figure, and that there is no prefect definition of "unemployed" is a hack.

There is plenty of bad reporting out there (including "analysis" from political talking heads that don't know the difference between U3 and U6), but U3 is like the snow forcasts for NY last week. If you don't care to look beyond the surface level, don't be surprised when a wide-breadth news establishment only gives the basics.

If anyone reading wants to see U6, or just doesn't know about raw data on FRED, go look at it [1].

[1] https://research.stlouisfed.org/fred2/graph/?chart_type=line...

Serious question - looking at the graph, it looks like the disparity between U3 and U6 jumped quite a bit in 2009 and is just starting to get back the historical difference today. Do you think it was valid to be concerned about the disparity increasing by so much in 2009? That part does strike me as a little worrying, though it is coming back in line now, which seems good.

The difference looks fairly consistent:

Febuary 1995: U6 is 183% of U3.

Febuary 2000: U6 is 175% of U3.

Febuary 2004: 173%

Febuary 2006: 155%

Febuary 2007: 182%

March 2008: 178%

Febuary 2009: 183%

March 2010: 172%

Febuary 2011: 177%

Febuary 2012: 180%

March 2013: 184%

Febuary 2014: 188%

There quite a bit of variance, but it seems to be seems to have been consistently in the 170-185%, with a few outliers.

Steep changes in the slope can introduce visual distortions when you compare the gap between two series. If you download and plot the difference, I think you'll see less of a change.

Anyone who deals in data professionally is sharply aware that any single figure measure is misleading on it's own. And if they live in the US they will more than likely be aware of the broad swath of government statistics that are made available ( for free ) to the public. As such it's quite easy to develop a contemptuous attitude towards lay people who aren't aware of things that are so foundational to people who work in the field.

That the "lie of the official unemployment statistics" keeps on getting rediscovered is a testament to the general lack of numeracy in the population at large; and to the construction of political reality by the media and the political class.

And in a political sense, the unemployment statistics are a lie; since we are supposed to be reassured that the situation is fine when in fact it's not. If the vast majority of people in their prime earning years ( 35-55 ) are drastically un- or under- employed what does that mean a decade out? Are we going to have millions of 60 year olds who haven't held a straight job in a decade? What's going to happen to them? Are they all going to survive by panhandling in the parking lot at Walmart? What?

Indeed,

In the former USSR and other totalitarian states, the government put out a false, rosy picture of the economy which was generally held in contempt.

In the US, the government puts out a "true after these many caveats" picture that most people are fairly doubtful of.

It seems like the present order is simply developing more defensible propaganda.

The government puts out a range of statistical measures and the media promptly ignores 95% of the data. In what way is that propaganda?

To be fair, it's not as though the government treats the wealth of data as equally important and the media just fixates on one measure. The government wants to tout that low unemployment rate as well, and they make sure to do so whenever it fits their purposes.

Still a far cry from saying they're lying to us, but they're not exactly innocent victims either.

Just to plug ALFRED, you can get the numbers as they were released in real time as well:

Unemployment: http://alfred.stlouisfed.org/series?seid=UNRATE

U6: http://alfred.stlouisfed.org/series?seid=U6RATE

One strong reason to prefer U3 is that the series is available much further back in time.

> One strong reason to prefer U3 is that the series is available much further back in time.

Isn't it a bit like saying one should prefer the bible to carbon dating because we've only had carbon dating for the last handful of decades?

It's not that U3 is useless, but one shouldn't assume it properly describes unemployment.

Well, I think it's more like saying we should prefer temperature data based on tree rings or ice cores (or, even, old mercury thermometers).

"Prefer" is probably the wrong word, so you certainly have a point. "Accept, with a note that the data isn't ideal" is much better. I'm OK with using less-than-ideal data when ideal data isn't available; but I'm disappointed with the number of reports that fail to mention any limitations of their. It's entirely acceptable to say "we don't have enough data to establish whether this claim is true."

It's a bit like saying that having data on 1960 is useful.

No, it's not relevant how long we've had the method--what's relevant is how far back the data goes.

That's a nice chart.

I find the periodicity very interesting. We're almost 5 years from the latest unemployment peak. Historically, it looks like we're likely to start trending back towards higher unemployment again, any year now.

Yes, it's like people think they've stumbled upon something novel by "exposing" the definition of the U3, which has been in place and largely unchanged for a long time.

It would be equally "misleading" to just say 11% of people are unemployed by using the U6. There's nuance to these numbers.

This article calls the official unemployment rate "misleading." That's moronic. It's explicitly detailed and if you prefer to use a different metric, do so. The value of the # is not the specific percentage itself, it's the trend. Follow any trend you like, they've all had a similar trajectory the last few years.

I think it's the difference between "This is intrinsically misleading" versus "People who want to mislead you may use this when they try".

> This is intrinsically misleading

Exactly. Reporting the same number over time sounds very serious and correct, unless the nature of the market itself is what changed. In which case the reporting may totally miss the real event worth reporting. That said, the conversation here is rich in part because at least people are aware that the underlying market may have changed.

> Exactly.

Wait... exactly what? I'm confused because the "quote" you're using from my post is (ironically?) deeply misleading.

Reporting U3, or any other number, as "the unemployment rate" is intrinsically misleading if the underlying reality has changed. The system under discussion is not a physical system that we are discovering, it's an economic system that we are constantly manipulating. Frequently, the system is manipulated specifically to push one number or another in a politically desirable direction. This makes the reporting of any given number potentially "intrinsically misleading".

By contrast "People who want to mislead you" may try to use this number, but even their attempts are undermined by changes in the underlying dynamics.

Isn't one of the points in the OP that the market itself has changed?

> Yes, it's like people think they've stumbled upon something novel by "exposing" the definition of the U3

For literally every President for the past 25 years, I've had someone breathlessly tell me "they just changed the way they calculate the unemployment rate so it doesn't look so bad!!!!!11"

They probably make small methodology changes all the time.

They do, but they're published and very rarely are they significant.

Well, some of them were right. That has less to do with U3/U6 than it does the way data is gathered and the birth/death model they use. Actually trying to figure out how many people have full time jobs isn't a trivial task, and it's very much open to manipulation.

> It would be equally "misleading" to just say 11% of people are unemployed by using the U6. There's nuance to these numbers.

How about those on SSDI? Are they included in any of the numbers? My neighbor used to work as a landscaper, but now collects SSDI while doing odd (cash) jobs here and there.

But if that U3 metric doesn't describe what normal people feel (the sort of people that don't know the difference between U3 and U6), then there is an argument for calling its "official" designation a sleight of hand.

The U6 metric counts underemployment as unemployment. This reflects the common sentiment in the media, and it obviously shows a lack of recovery where other metrics have fully recovered by now.

I would be very interested in knowing the history / politics / whatever of how U3 became the "official" measure, what that really means, and what the arguments are for and against its continued use.

For instance, most people (the vast majority, anecdotally) don't have any idea that there are multiple measures, and what the one they always hear about does and doesn't include. I've never heard the terms U3, etc. used on the television news or seen them on the front page of the NYT. Why is that? I doubt it's some conspiracy, but I'm genuinely curious how we got here, why we're still here, and whether we should instead be somewhere else.

I'm not sure how or why that became the standard, but it's the standard per the International Labour Organization. The U6 rate only started being recorded in 1994.

U3 data goes back to 1890. There's always someone, usually in an opposing political camp, who says "it's misleading" when it goes down, or when it goes up. Both the left and the right have done this sort of handwaving over the years, but having a stable statistic that goes back many decades is useful even if you want to look at others for a more complete picture about what's going on. On some planet having U6 go from above 17% to just over 11% from 2009 to the present counts as "failed recovery" but I'm not quite sure how. You could argue that there's a bit of a gap there, like around 1.5% if you look at recent history, and maybe even argue that it's structural, i.e. that information technology is causing full-time work to go away, etc. but that's a technical argument to have, which would require looking at a lot of data and not just trying to score points by cherry-picking.

>On some planet having U6 go from above 17% to just over 11% from 2009 to the present counts as "failed recovery" but I'm not quite sure how.

Agreed. I argue this point all the time, actually. I think it's interesting to go back through and look at how unemployment fairs in comparison to the political party of the president during that time. Looking at the U3 rate for the past 50 years, unemployment has only gone down once under a republican president (Reagan) and Carter is the only democrat in the past 50 years who didn't see unemployment drop from the time he took office to the time that he left office.

Ah, this seems like the key answer to my question - it's the only one that's been tracked for generations, and we often want to compare across that time scale.

So I don't have any specific knowledge on this, but the intuitive answer is a combination of:

a) The Department of Labor puts out these measures in a boring, dry document. The news media then picks which measures to report on that will grab headlines.

b) Politicians and public officials latch onto the numbers that allow them to paint government and policies in the best (or worst) possible light.

Both of these lead to simplification of the source data. And if you are trying to paint it positively, you'd probably pick the narrowest, lowest unemployment number.

Not necessarily disagreeing with your intuition here, but that doesn't appear to be what happens - pretty much everybody reports on that same U3 measure. Certainly there are articles and discussions about other measures as well (for instance, the OP), but I never seem to see them in the "mainstream".

Since the U3 and U6 more or less follow the same trend., it makes sense to keep using the same reported measure for continuity. People know that 8% "umemployment" (aka U3) is bad. If you suddenly start reporting U6, people will think a 8% U6 is bad, when it is rather good.

If you want to use it to measure or model something else, you might have a reason to pick a different measurement.

I think of two other imperfect measures - the Dow Jones Industrial Average, and the relative temperatures (Windchill, Head Index).

The S&P 500 is a better index than the Dow. There are other indexes that are even more accurate. Yet the average layman 'gets' the Dow much better. Almost no one knows that the Dow is just a few dozen companies, and that the actual composition of the index changes all the time. Likewise, no one actually knows how windchill and heat index are calculated.

Yet, everyone can compare those things to past experience and 'get' what is going on. Holy crap, the Dow is up 400 points? Wow, it's going to feel like 105 tomorrow? Unemployment is 9%? Something is wrong.

If we suddenly switched to U6 as the 'official' measure, it would take a long time for people to adjust. Is 10% U6 good or bad? I have no idea without looking it up, even though I know what U6 is.

Right now it seems like the fed is working off of the higher unemployment numbers and semi-ignoring U3. I believe that is a good thing. But it is confusing to many.

U3 is the official measure because it matched the International Labour Organization definition[1]. Most countries use the same definition.

Measurement is always hard, and always requires caveats. There are good arguments both for including discouraged workers (hidden unemployment) and part-time workers who would prefer full time work (underemployment) in unemployment statistics. There are also good arguments against it, mainly around the fact that gathering those numbers tends to be more error-prone.

[1] http://en.wikipedia.org/wiki/Unemployment#United_States_Bure...

Just because something has been hidden in plain sight doesn't mean it isn't being hidden. Many people dig no deeper than the news headlines and I do think this has been abused in different areas to mislead the public.

I have to agree with Lawtonfogle on this. "Normal people" (which is a No True Scotsman fallacy, BTW) don't understand U3 unemployment because it's a wonky term with a precise (and possibly even counter-intuitive) definition and the people that "feel" something other than U3 are more than likely to not do basic research, the kind of people that don't bother to take personal responsibility and/or don't bother to find a way to train themselves for a better job (which likely makes them self-selecting for U6 unemployment). Isn't it more likely that the U3 number is simply a more useful number for the class of people that wonk-talk about employment statistics and set policy? It's more targeted than U6 (which is a catchall for "people who are not currently employed or underemployed and might or might not be looking for work"). It's the same reason the wonks tack on "seasonally adjusted non-farmworkers" when talking about these figures -- those terms mean relevant things and fundamentally change the population of workers you are talking about. Do the "normal" people concern themselves with the intricate details of Fed monetary policy, growth and yield details of equities, bond yeilds and their effects, foreign policy beyond the large military conflicts that the US is currently involved in? Nope. Why should they know the difference between "U3 unemployment" and "U6 unemployment" if they don't bother to learn? I agree with higher-raked comments that the U3 unemployment numbers are useful if (1) you consistently use U3 in all reporting (don't jump from U3 to U6 to other metrics), you talk about trends and not the absolute number, and you describe which one you are using and what the caveats are of using that number. For reference, the Wikipedia graph of U3 - U6: https://upload.wikimedia.org/wikipedia/commons/9/9b/US_Unemp... U3 and U6 track very well with each other. There are permanently structurally "unemployed"/"underemployed" people in the country. It doesn't seem to budge much, whereas the U3/U6 numbers do seem to change over time. This shows that U3 is a decent trend predictor of U6, suggesting that there is little difference between U3 and U6 when talking about trends. Also note that U3 data goes back MUCH further in time, which is another suggestion that it is a long-standing convention and not "sleight of hand".

Exactly. It's an INDICATOR. It's not a terribly useful metric in and of itself, but it signals the state of many other metrics in one neat package. U1-U6 all pretty much move in lockstep with each other.

I've often thought half the confusion with these could have been avoided if U3 was called the "unemployment indicator".

The op-ed misrepresents its own opinion, I think.

Their real gripe is in their belief that the average American is clueless about what goes into that ~5% unemployment stat.

BLS is transparent enough to make this criticism unwarranted, but the media/press covering unemployment statistics certainly aren't careful to define the stats they use.

Whether the 'sleight of hand' is intentional or not is another story (I'm inclined to say it's not, people just need a figure to benchmark to)

Clifton does not argue that the measurement is not available. I think he is arguing that U3 is not the most useful figure for Americans to hear the most about, from supposedly trustworthy sources.

> Here's something that many Americans -- including some of the smartest and most educated among us -- don't know: The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading.

U3 is not referred to as the "headline rate", it's called "official unemployment". While it's unfortunate that most Americans would not inform their voting--or other decisions--by researching the alternate measurements of unemployment, it is indeed the reality.

One would like to assume that when the president or a news organization cite an "official unemployment rate", they are offering us the best information about what might concern the average citizen. The number of people who have totally given up on finding a job is definitely one such piece of information. This, I think, is Clifton's main point.

Anecdotally, I've been pleasantly surprised at the amount of coverage alternate measurements get in the media. I've seen several segments that highlight this. It seems to me that the meaning of the "official" definition is becoming more commonly known. I think Clifton would disagree with me here.

Although, you might try explaining about U6 to a group of people who don't know about it. In several instances, I've been labeled a conspiracy theorist for doing so! Luckily, as you point out, the government does actually provide this information. I'm glad some are spreading the word!

The absolute value of unemployment isn't particularly important. It's never going to be 0%, so you end up having to establish some n where n% is "full employment". In the US that's around 5% for U3. We were around 5% before the financial crisis and are approaching it again now. That's a meaningful change.

U6 is only politically relevant versus U3 if the two have diverged over time. As you might expect, the two increase and decrease in near lockstep [1]. The U6-U3 gap widened during the Great Recession but is narrowing now. It's about a point higher than it was the last time U3 was at current levels. This is significant, but it doesn't make the trend or relative value of the U3 rate less meaningful.

[1]: http://goo.gl/iEBEq0

I don't think it's baseless. The "sleight of hand" he asserts is the conscious or unconscious choice to draw conclusions from just the u3 numbers, and I agree with him.

He's arguing that if we look at a single metric, as is useful for mass media reporting, it should be the more inclusive definitions to help keep our society accountable.

This keeps popping up because many average people have their own understanding of unemployment and it's not the official one.

I'm going to go out on a pedantic limb and say that defining U3 as the "official rate" of unemployment is misleading.

There is no such thing as a singular unemployment rate, and we could be more transparent when we talk about it. Being clear that we are referring to the U3 indicator of unemployment could help raise the question of nuance for average people.

Faulting people for their illiteracy doesn't help move us forward. If we find a way to make them literate, this goes away.

Very true, every stat has issues.

Take payroll of population that this CEO thinks is a better metric. It totally ignores demographics of a aging population.

Baby-boomers are retiring, how a metric based CEO ignores this shows were the real bias is.

Uh, this metric is nuts, because it views anything that isn't 9-5 on a payroll as 'not a real job'. That ignores everything from independent contractors to seasonal work. These are huge components of the economy and always have been.

So what does a movement in the metric even mean? Does it mean that people are working less, or does it mean that more people are self employed? Or students longer?

I think wages are a more insightful way of estimating labor supply and demand. It's not great news:

"U.S. real (inflation adjusted) median household income was $51,939 in 2013 versus $51,759 in 2012, statistically unchanged. The 2011 level was $51,842 and the 2010 level was $52,646.

In 2013, real median household income was 8.0% lower than the 2007 pre-recession level of $56,436.[1]" (wikipediarite)

Wouldn't U3 be the only most likely to stay the same, though? You could basically consider that rate as the "recently fired/quit" rate. I'd think a "people who have given up on work entirely" rate would be much better.

> The BLS puts out 6 different unemployment statistics for every period. U3 is the "official rate", but you can also look at the other ones, including U4 = U3 + "discouraged workers", U5 = U4 + "marginally attached" workers, U6 = U5 + part time workers who would like to be full time.

Though folks might want to see some historical data: Here's a graph of U3 (labeled "official"), U5 and U6. http://www.macrotrends.net/1377/u6-unemployment-rate

Boy am I glad to see this is the top comment.

There's nothing misleading about the 5.6% figure. That's the number, and the details on how it's calculated are freely available. If you don't like it, choose another value, make your own adjustments, whatever. Besides, the absolute values matter very little; the trend is what counts.

I found this funny: "None of them will tell you this:"

Really? I don't think there's a discussion about unemployment on the internet that doesn't mention the fact that certain people are excluded from the calculation of headline unemployment.

Those using U3 to promote a positive narrative all know that the general public mistakenly believes "5% unemployment" = "95% of people who want to work full time are working full time."

That's what's misleading.

Under U3, 5% unemployment is considered more or less normal. Sometimes economic booms dip below that (at which point you usually get contractionary policies to prevent inflation). But 5% will be reported as good news.

If U6 was the headline number, "normal" would be 8-9%, and that would be reported as good news. I see no reason to believe that the absolute difference between those numbers would have any effect on politics or policy.

The problem is the media, White House, etc all don't use those metrics for the current numbers, and then compare them to previous numbers that do include these other categories.

Apples and oranges.

All satistical mesures are adjusted to suit the UK's ONS is going through this with a replacement for RPI/CPI infaltion mesures.

The first new mesure CPIH did not come up with the figures the govenment liked so the ONS wher told to go away and try again. Thsi is first hand info from an insider.

Unemployment is also subject to fiddling one previous UK govenment put presure on Doctors to sign people onto disablity - to reduce the headline rate.

This is really great, and something you should be proud of.

Here in Germany, there's just one unemployment number, and its measurement is adjusted some time to time. So in theory, you could have a raising unemployment rate but decreasing official numbers, just by adjusting the definition from year to year.

And in practice, nobody doubts that our government does exactly that. It's really sad.

Well, I doubt they'd do that. Having worked with Germans, I find it difficult to believe that these numbers would be very easily conned by changing how statistics is done.

I am also quite sure that there are various different unemployment numbers calculated by German statistics officials, but the media may wish to stick something simple, which is probably the one that is also comparable across OECD countries.

The problem is that U3 is the only thing that is talked about by politicians and the media.

Of course the varying measures are out there, but the most powerful ones are the ones which get press time (and generally only the most favorable looking ones do)

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