What Is the Real Unemployment Rate?

The U-6 real unemployment rate includes the underemployed, the marginally attached, and discouraged workers. It's usually much higher than the U-3 unemployment rate, which is the rate most often reported in the media. The Bureau of Labor Statistics only counts people without jobs who are included in the labor force for the U-3 rate. They must have looked for a job in the last four weeks to remain in the labor force.

The chart below shows the discrepancy between the unemployment rate (U-3) and the real unemployment rate (U-6) between 1994 and 2021.

What the Real Unemployment Rate Means for You

The real unemployment rate includes several categories the U-3 unemployment does not: underemployed people, marginally attached workers, and discouraged workers.

Underemployed people are part-time workers who would prefer full-time jobs. The U-3 report counts them as being employed and in the labor force.

Marginally attached workers have looked for jobs in the last year, but not in the previous four weeks, which means they aren't counted in U-3. They're not included in the labor force participation rate, either.

Discouraged workers are marginally attached workers who aren't looking for work because they believe they can't qualify for available jobs, or because the don't believe there are any available jobs.

Keeping an eye on the real unemployment rate can give you a broader picture of the current employment situation, which may influence your own employment or career decisions.

How To Calculate the Real Unemployment Rate

Three are steps to calculating the real unemployment rate:

1. Add the number of officially unemployed and marginally attached workers to those who work part-time for economic reasons to get the number of un- and under-employed.
2. Add the number actively in the labor force to the number of marginally attached workers.
3. Divide the total number of un- and under-employed by the total labor force, including marginally attached.

Compare the Real Unemployment Rate

The official unemployment rate has been a little more than half the real rate throughout the years. That remains true no matter how well the economy is doing. The real unemployment rate stayed at 6.9% as the official rate dropped to 3.9% in December 2020. Meanwhile, the unemployment rate was 10.0% in October 2009, its highest after the 2008 recession. The real rate, however, was still a much higher 17.1%.

The chart below puts things in perspective. It compares the official unemployment rate to the real rate since 1994, the first year the BLS collected data on U-6. The rates given are for January of each year.

Compare the Highest Unemployment Rates

The unemployment rate during the Great Depression surpassed 25% between March and June of 1933. Unemployment rates were calculated differently back then, but this was likely similar to the real rate today.

The official unemployment rate (U-3) reached a peak of 14.8% in April 2020. The real unemployment rate, including discouraged, marginally attached, and part-time, was 22.9%. This may give a better sense of how the labor force fared in 2020.

You could say that it took the Great Depression several years to get to the level it reached if you wanted to make a case for unemployment being worse during the 2020 recession. And the 2020 recession nearly equaled it in just a matter of months.

Frequently Asked Questions (FAQs)