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What's the Real U.S. Unemployment Rate? We Have No Idea

A job fair in Washington
A job fair in WashingtonPhotograph by Chip Somodevilla/Getty Images

No U.S. economic statistic is more important than the unemployment rate, which was officially reported as 6.2 percent in July. But a new academic paper, highlighted in the New York Times, finds that a long-known source of potential error in the unemployment rate “has worsened considerably over time.” The actual rate may be higher than the reported one, though it’s hard to know for sure, the paper says.

The unemployment rate is calculated by averaging the results from eight separate samples of the population, known as rotation groups. In theory, the people in all eight rotation groups should have the same likelihood of being unemployed, but they don’t. In the first half of 2014, the newest rotation groups had an unemployment rate of 7.5 percent. The oldest rotation groups had an unemployment rate of just 6.1 percent.