Tragically the answer seems to first hinge upon anotherquestion:  Do you believe that theeconomic recovery has begun, or do you believe that policies aimed to spur theeconomy have failed?

Asked separately, butsimilarly:  What is your politicalaffiliation?  

At this point you may be thinking that one’s politicalphilosophy in no way affects how a statistic is calculated. You would be rightin that line of thought, it doesn’t; however what it does affect is which unemployment statistic is used,and not-surprisingly analysts and politicians gleefully cherry pick the numberto best serve their own arguments.

So, what is the current unemployment rate?

Before we get the answer, we need to explore more questions.  The following answers lean on a great article entitled “What is Unemployment?” by Rea Hederman, Jr.

The federal government began collecting labor statistics in1870, when the decennial census began counting the number of “gainfullyemployed” Americans.  Note how thisstatistic calculated the employed rather than the unemployed as”Unemployment” was not yet in the American lexicon.

It wasn’t until the Great Depression and the subsequentenactment of many social programs for the unemployed that the federal governmentdecided they needed reliable ways to measure whether their policies wereeffective or not.

In 1940 under the auspices of the Works ProgressAdministration (WPA) a national survey called the Monthly Report ofUnemployment was created.   The vague threshold of “gainfulemployment” was replaced with a set of terms meant to measure a person’sprecise labor activity (or lack thereof) in the course of a month.  Individuals had to be employed, unemployed,or looking for work.

In 1942 the WPA was terminated and the task of employmentsurveying was transferred to the Census Bureau. Renamed the Current Population Survey (CPS) in 1948, and outsourcinganalysis to the Bureau of Labor Statistics (BLS) in 1959, this report remainsthe source of much of the government’s data about the labor force.

The CPS works by looking at a enormous random sampling of60,000 households each month, and examines the status of all working-agecivilians.  This large sample size allowsfor statistical corrections ultimately producing a reliable picture of thelarger population with a margin of error of less than 0.2%.      

A separate monthly survey called the Current EmploymentStatistics survey (CES, often referred to as the payroll survey) pollsemployers rather than employees asking how many workers they employ aswell as their employee’s hours and earnings.

“The basic unemployment rate today measures the numberof unemployed workers as a percentage of the total civilian labor force; the laborforce in turn is defined as those who reported that they were employed in agiven month’s CPS, plus those who did not work in the week about which the CPSinquired (but who did actively search for a job at some point in the previousfour weeks and could begin working if offered a job)”

It’s Overstated.  Someeconomists argue that the criteria for “actively searching for a job”are extremely loose.  A casualconversation about a job with a friend, updating your Facebook status (I amserious), all count.

It’s Understated. Others argue that the “unemployed” criteria does not accountfor those who might want to work but have not been searching in the past fourweeks.  These people may feel that they haveno hope for employment at the time or have health problems preventing them fromsearching.  This definition also excludesthe underemployed, or those seeking full time but currently working part time.

To address these concerns the Bureau of Labor and Statisticsslices and dices the data into six different unemployment figures lettingeconomists, policymakers, journalists, and the broader public choose what theywant.  Created in 1976 and revised in1994, this “U series” or six figures labeled U-1 through U-6, eachprovide a different measure of the underutilization of labor-forces. 

Numbered from most restrictive to least restrictive: (data, release schedule)

U-1: includes workers who have been unemployed and activelyseeking jobs for 15 weeks or more; it is used to asses the severity ofunemployment, since significant long term unemployment suggests a particularlydepressed labor market.  (Seasonallyadjusted June 2010 rate: 5.8%)

U-2: is a measure of job loss, counting the percentage ofthe labor force that is unemployed as a result of being involuntarily let gofrom a job. (5.9%)

U-3: measures the number of people who are out of work butactively looking for jobs as a percentage of the total labor force.  This is the most commonly quoted statisticand is referred to as the “official” unemployment rate. (9.5%)

U-4: this rate includes those counted in U-3, plus so-called”discouraged workers”, or people who do not believe they can findwork.  Note: the discouraged workercategory is extremely subjective and has sparked much debate among economists.(10.2%) 

U-5: includes all those in U-4, plus people who say thatthey wa
nt to work but are not actively looking for work for reasons other thandiscouragement (referred to as “marginally attached workers” – theseare people who have ever thought about one day having a job). (11.0%)

U-6:citied as evidence of a trouble in the labor market. (16.5%!)

Each of these statistics does provide incite into the healthof the labor force however research has proved that some are more reliable thanothers.  Unfortunately those numbers which have been determined to have debatable meaning are also those most often quoted by reporters and pundits.  For example:

“The unemployment rate may be at 9.5percent, but that doesn’t come close to measuring the share of the workforcethat is directly affected by the crisis in the labor market. Theunderemployment rate, for example, now stands at 16.5 percent.” -Washington Post Article arguing for extended unemployment benefits

“While official unemployment hovers around 10%, real unemployment[U-6] is frighteningly higher at nearly 17%.” – Eric Cantor, House minoritywhip

…to argue for expanded social policies: (generally muted over thepast two years as Democrats are not inclined to highlight grim job numbers ontheir watch. We have to go back a little farther) 

“While therise in unemployment has been the focus of many news stories throughout therecent economic downturn, a related issue that has received far less attentionis the effect ‘underemployment’ [U-6] is having on America’s working families.”  

In another statement House Majority leaderSteny Hoyer is quoted as also saying: 

“In his last act of economic malpractice,President Bush continues to resist these vital steps for recovery. But if hecannot be convinced to sign an economic recovery package, the DemocraticCongress will ensure that President-elect Obama can sign it quickly after he issworn in.”