Unemployment numbers may be worse than you think

Friday’s news that the official unemployment rate is now at a 26-year high of 9.4% is actually a rosy spin on what is really happening.

To get a more comprehensive snapshot of the labor picture you need to focus on the less well-known U-6 data set known as “alternative measures of labor utilization.” When you add up U-3 and all the underutilized workers the official U-6 rate for May 2009 is 16.4%.

So exactly how bad is that from a historical perspective? Pretty bad.

The BLS began reporting U-6 in 1994; in January 1994 the U-6 rate was 11.8% and then steadily declined before reaching an all-time low in October 2000 of 6.8%. During the ensuing recession/bear market U-6 peaked at 10.4% (Sept 2003) until the credit crisis took hold in 2008. The U-6 rate hit 10.9% in August 2008 and has been on a rapid climb ever since; over the past year it has shot from 9.8% to today’s 16.4%.

It sure makes it hard to buy into the green shoots theory just yet.

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