Justin Fox, Columnist

What's Really Wrong With the Unemployment Rate

Changes in the labor market outweigh changes in methodology.

August 10, 2016 at 7:29 PM UTC

Justin Fox is a Bloomberg Opinion columnist covering business, economics and other topics involving charts. A former editorial director of the Harvard Business Review, he is author of “The Myth of the Rational Market.”

That's one way to leave the labor force.
Photographer: William West/AFP/Getty Images

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The U.S. unemployment rate was 4.9 percent in July, according to the Bureau of Labor Statistics. That’s the same as in July 1997. Does this mean the labor market is as healthy now as it was then, in the early days of the late-1990s boom? No, it doesn’t.

The broader U-6 unemployment measure, for example, which includes discouraged workers and involuntary part-timers, was still at 9.7 percent in July, compared with 8.6 percent in July 1997. The job growth reported by employers was, at 1.7 percent over the past 12 months, well short of the 2.6 percent pace of July 1997. And most discouragingly, the share of Americans 16 and older who were in the labor force (that is, either working or looking for a job) was just 62.8 percent, compared with 67.2 percent in 1997.