Real Unemployment Rate is Probably Close to 10%

Source: Heidi Shierholz, Economic Policy Institute, February 12, 2009

In January, the unemployment rate was 7.6%. In the calculation of the official unemployment rate, however, only jobless workers who are in the labor force actively seeking work are considered. So, to the extent that workers have dropped out of (or never entered) the labor force because they felt they would not be able to secure meaningful work, the official unemployment rate understates weakness in the labor market. From January 2001 to January 2009, the labor force participation rate dropped 1.7 percentage points, from 67.2% to 65.5%. If the labor force participation rate had not declined over that period, today there would be an additional four million workers in the labor force. And if those missing workers were counted as unemployed instead of as not being in the labor force, the unemployment rate today would be 9.9%.

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