November U-5 Unemployment Rate: 6.8%

The U-5 unemployment rate for November is 6.8%, and seasonally-adjusted, it would be 7.1%.

The “official” unemployment rate is the U3 unemployment rate, but it used to be the U5 unemployment rate.  The Bureau of Labor Statistics revised the Current Population Survey in 1994, and among the changes made was the measure representing the official unemployment rate.  It was changed from U3 to U5.

Here are some explanations of various unemployment classifications:

U-3 – Total unemployed, as a percent of the civilian labor force (official unemployment rate).

U-4 – Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers.

U-5 – Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force.

The official U3 unemployment rate does not include “discouraged workers.”

“Discouraged workers” are people of legal employment age who are not actively seeking employment or who do not find employment after long-term unemployment.

Wikipedia states: “…even if a person is still looking actively for a job, that person may have fallen out of the core statistics of unemployment rate after long-term unemployment. and is therefore by default classified as ‘discouraged.’”

Also, U3 unemployment does not include persons marginally attached to the labor force, or “marginally attached workers.”

The BLS defines “marginally attached workers” as “Persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Discouraged workers are a subset of the marginally attached.”

It has also been claimed that other countries such as Germany include the “marginally attached worker” and “discouraged worker” in their official unemployment rate calculations.

Considering the fact that prior to 1994, the unemployment rate used to be the U5 rate and that other countries include the “marginally attached” and “discouraged worker” in their statistics, the U5 rate might be considered more appropriate than the “official” U3 rate.