The Unemployment Rate is calculated as the share of the labor force that is unemployed. The federal government uses what is known as the Current Population Survey to determine who is in the labor force and whether they are employed or unemployed. To be considered in the labor force, someone has to be employed, or available for work and has to have actively looked for work in the preceding four-week period. Those who may want to work but are so discouraged about their chances of finding a suitable job that they haven’t actively sought one in the preceding four weeks are not counted among the labor force.
Looking at the unemployment rate won’t tell you how long people without jobs haven’t been able to find work, for instance. And it doesn’t reveal anything about the number of people who are underemployed.
Another measure and possibly a more accurate one to use as a candidate market gauge is the Underemployment Rate. This includes the unemployment rate and those working part time who would prefer full-time work as well as the discouraged job seeker.
Unlike unemployment, where a person is actively seeking a job and cannot find work, underemployment describes a situation where a person is working, regardless of the number of hours or the skill level.
Underemployment includes employees who are working fewer hours than is typical in their field. They are willing and able to work more hours but cannot get full-time employment. They often work two part-time jobs just to make ends meet. The underemployment rate also includes those who are discouraged and no longer seeking employment but qualified to employ.
There are many reasons why workers can’t find the jobs that they want or that they’re qualified to perform. Underemployment becomes an issue when the supply of certain jobs is lower than the demand for those positions. The first known use of the underemployment rate was in 1909.
Relying on the unemployment rate as a benchmark alone is a mistake – the underemployment rate has become the new measurement of the labor market.
Both have been the lowest in over a decade…