The Current Population Survey (CPS), conducted by the U.S. Bureau of Labor Statistics (BLS), is a key source of data on unemployment in the United States. The national unemployment rate is determined as a result of this survey; this number is then touted by the media to summarize the state of the economy and its workers. But the unemployment rate doesn't tell the whole story of how American workers are faring. 

Key Takeaways

  • The national unemployment rate is determined as a result of the Current Population Survey (CPS), conducted by the U.S. Bureau of Labor Statistics (BLS).
  • The true percentage of people who don't have jobs or aren't making enough money is often worse than the official unemployment rate suggests because the Current Population Survey (CPS) doesn't collect certain information from those surveyed.
  • The CPS report doesn't take into account whether or not workers are employed full-time, if they are underemployed (working at a job that requires fewer skills and offers lower pay than the best jobs for which a worker is qualified), or if a worker has given up job searching (even though they need a job) because they are discouraged.

According to the BLS website, the CPS counts the following people as employed:

  • All persons who worked for pay or profit during the survey reference week.
  • All persons who did at least 15 hours of unpaid work in a family-owned enterprise operated by someone in their household.
  • All persons who were temporarily absent from their regular jobs, whether they were paid or not (this includes persons who were on vacation, ill, experiencing child-care problems, dealing with family or personal obligations, on maternity or paternity leave, involved in an industrial dispute, or prevented from working because of bad weather).

What Information Is Missing From the CPS?

Clearly, the CPS is an important measure, but it can't tell us everything about the state of unemployment in the U.S. Here are some factors that impact workers in the U.S. but are not accounted for in the CPS.

Whether Workers Have Full-Time Hours

The CPS counts people as employed if they are working at part-time or temporary jobs, regardless of the number of hours worked or whether this employment represents a sufficient or ideal employment situation for that worker. If a laid-off consultant works 10 hours at a fast-food restaurant, they would be counted as employed. However, this employment is likely neither sufficient to pay their bills nor ideal for this individual (or society as a whole), given that he is qualified to do more challenging, more productive and higher-paying work. 

Whether Workers Are Underemployed

The consultant working as a server at a fast-food restaurant is an example of something else that is not measured by the unemployment rate: underemployment, or working at a job that requires fewer skills and offers lower pay than the best jobs for which a worker is qualified. Our consultant would also be considered an involuntary part-time worker, yet another factor the unemployment rate does not consider.

Whether a Worker Has Given up Job Searching

The BLS only counts as unemployed those who "do not have a job, have actively looked for work in the prior four weeks, and are currently available for work." If you have a cold (known as a "temporary illness"), you are still considered available for work by the survey.

However, if the state of the economy is so bad that you become depressed about losing your job, or your recent attempts at job searching have been so futile that you haven't attempted to get a new job in the last four weeks, you are no longer considered unemployed: you become "marginally attached" to the workforce or a "discouraged worker" and are no longer counted in the unemployment rate.

Other people not considered part of the labor force include prisoners, people confined to nursing homes, members of the Armed Forces on active duty, homemakers, students and retired persons.

What the Unemployment Numbers Mean in Context

Another problem with the unemployment rate is that it cannot be used to accurately compare unemployment levels from different years. According to a 2009 report by economists John Schmitt and Dean Baker of the Center for Economic and Policy Research, it is difficult to accurately compare, for example, the unemployment rate in 1982 versus the unemployment rate in 2009 because of changes in the age makeup of the population. According to Schmitt and Baker, a younger population will result in a higher unemployment rate because "the young change jobs more frequently and are more likely to move in and out of the labor force." In addition, government methods of measuring the unemployment rate may change over time, as they did in 1994 when the BLS overhauled the CPS, changing its questionnaire and some of its labor-force concepts.

True Unemployment Is Not Reflected in the Unemployment Rate

There are many problems with relying too heavily on the national unemployment rate as a meaningful indicator of the state of the economy and its workforce. Unfortunately, this often means that the true percentage of people who don't have jobs or aren't making enough money is often worse than the official unemployment rate suggests.