Q&A of the Day – How the Unemployment Rate Is Measured
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
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Today’s Entry: Hi Brian, I listened to your question the other day about how low unemployment is in Florida especially, but I know that more and more people are working two jobs. Does that have anything to do with the low unemployment rate?
Thanks. And thanks for all the constant hard work you do!
Bottom Line: Today’s note came on the back of the recent news that Florida, and Palm Beach County specifically, continued to improve upon what was already record setting employment with record low unemployment rates. It’ll take us another few weeks before we know what happened in Florida most recently in March, as we just received the national employment report on Friday, however as of February, Florida’s unemployment rate and Palm Beach County’s specifically stood at just 2.6%. Florida has the 7th lowest unemployment rate in the country, and far and away the lowest of any large state. The next closest is Texas with an unemployment rate of 4%. It’s been a great news story for Florida, and South Florida specifically, which has only continued to get better. But...to the point of today’s question...is the especially low unemployment rate in Florida really all it’s cracked up to be? The answer is both yes and no.
Amid the second consecutive year of 40+ year high inflation you’re right that there are many, millions in fact, of Americans who’re working multiple jobs to try to make ends meet. This is one of many employment related stats tracked by the Bureau of Labor Statistics quarterly, and most recently, 4.8% of all people in the workforce held two or more jobs. So, does that mean that’s shaving say 4.8% off of the unemployment rate in addressing today’s question? The answer is no. This is actually related to a different question I addressed just over a couple months ago about the Labor Force Participation Rate. The reason is that you can’t have one without the other.
Here’s what the unemployment rate actually measures...
- The number of unemployed people as a percentage of the labor force (the labor force is the sum of the employed and unemployed). The unemployment rate is calculated as: (Unemployed ÷ Labor Force) x 100.
Right, so it’s impossible to know what the unemployment rate represents, without knowing the labor force participation rate.
Here’s what the labor force participation rate is:
- The proportion of the population ages 16 and older that is economically active: all people who supply labor for the production of goods and services during a specified period
So nowhere in there is a consideration for working multiple jobs. Whether a person is working one or three they count just the same in the overall unemployment rate picture. That said, as mentioned in my previous reporting, this is where the especially low unemployment rates of today can often be misleading. Because of the importance of the labor force participation rate, if fewer people decide to work – it drops. And if they’re not in the labor force – they're not counted as part of the unemployment rate. This is the rest of the story of what’s been going on. The labor force participation rate isn’t close to being back to where it was. The labor force participation rate had hit a seven year high in February of 2020 – heading into the impact of the pandemic. The rate was 63.4%. So where are we today? 62.6%. The difference between those two figures is 2.11 million people. So no, today’s national unemployment rate of 3.5% isn’t really comparable to a pre-pandemic unemployment rate of 3.5% because there are millions fewer people working. But that’s also what makes Florida’s story so impressive.
Florida became the first large state in the country, and still the only one, to pass pre-pandemic levels of employment in October of last year. That means that as we’ve continued to make consistent employment progress in the months since, unlike the country as a whole, it’s truly record high employment that we’ve had and continue to build upon in Florida and throughout the Palm Beaches. We have our affordability challenges no doubt but thankfully we have record opportunities that so many are taking advantage of as well.