It happens for first Friday of every month. The much awaited jobs report is released. On December 7th we heard that unemployment for November had hit a four year low — at 7.7% – while 148,000 new jobs were created. Those numbers beat the experts’ predictions and that’s great news for the economy in general.
Why is this number important to recruiters? As the economy inches closer to full employment (that’s when basically everyone is working who wants to hold a job), recruiters will find it increasingly more difficult to find the quality candidates they need to fill openings. That means recruiters will have to adjust their strategies, use more intrusive media, and add more dollars to their budgets.
The number that we get each month on the news is what the government calls the U.3. This is the total unemployed as a percentage of the civilian workforce. That sounds like the perfect number. But leave it to the government to fiddle with the calculation to make it imperfect.
Although we see the U-3 each and every month, do we really understand it? Case in point… From October to November the U-3 unemployment rate dipped from 7.9% to 7.7%. The month of November job creation was stated at 148,000 – just enough to keep pace with population growth. So job growth could not have affected the rate. It actually has everything to do with the way the U-3 measures the unemployed individuals.
The U-3 does not include what the government terms “discouraged workers.” These are the individuals who have given up looking for a job because they do not appear to be out there, but they would like to be working. From October to November 20.4% became a “discouraged worker.” Therefore, you saw a drop in the unemployment rate (the U-3). The government moved a huge number off of the unemployed roles even if they would be willing to take a job.
Enter the U-6. This employment rate includes those who have been “discouraged workers” for less than a year. If you have tried looking for a job over the past few years, one year doesn’t seem excessively long in this economy. Including these individuals raises the unemployment rate to 14.4%.
For over a decade the spread between the U-3 and U-6 was fairly steady at between 3% and 4.5%. But since the recession of 2008, it is up to 7%. That should be a matter of concern.
And if your head hasn’t exploded yet, yes, there are monthly rates called U-1, U-2, U-4 and U-5. Click here for a table showing all six categories. Why do we need all of those numbers? Someone must need them. But we rather doubt that you do.