There’s unemployment and there’s unemployment. There’s U3 and there’s U6. There’s the Current Population Survey and there’s the Payroll Survey. There’s what you think you know about unemployment numbers, and there’s…well, you get it by now.
The reality is that there are numerous ways to measure unemployment. To say that one is more accurate than another is to miss the point. Differences between methods lie not in accuracy so much as measurement nuances.
As ERE labor market columnist Raghav Singh points out in a recent article, “The true level of unemployment can likely never be known with any degree of precision. There is no reliable methodology for defining who is considered unemployed or employed.”
But that doesn’t mean it’s not useful to understand the disparities between the ways we measure and talk about unemployment. For as Raghav also explains, “In practical terms, the unemployment rate, regardless of measure used, is best looked at as a trend indicating the direction of the economy.”