The Bureau of Labor Statistics (BLS) reports the unemployment rate on the first Friday of every month. It’s up there with the GDP (gross domestic product) as one of the most important indicators of the economy’s overall health. It’s supposed to show the percentage of people who are out of work, but the way the report defines “labor force” and the way some populations are included or left out are controversial and not always representative of the reality on the ground.

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BLS measures the unemployment rate by dividing the number of unemployed people by the number of people working in America’s civilian labor force. The labor force consists of those who are employed and those who are unemployed. The problem is that to be counted as unemployed, you have to be both out of work and actively looking for work at the same time.

That leaves out a whole lot of people who just gave up and stopped looking for more than four weeks, which is the BLS cutoff. It also leaves out millions of incarcerated Americans, full-time caretakers and college students, as well as those who are disabled, dealing with long-term illnesses or who left the workforce to raise children.

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The official unemployment rate is the third of six rates that the BLS issues. It’s called U-3. Many economists have argued that the official rate should instead be based on U-6, which includes all of the groups that U-3 omits. Because of those omissions, they argue, the real unemployment rate is certain to be much higher and much closer to what is reported in U-6.

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Few Flags Are Redder Than High Unemployment

Extremely low unemployment can have negative effects like inflation and lost productivity, but when lots of people are out of work, things are always bad with no exceptions.

When unemployment is high, jobs are scarce, and people are broke or worried they soon might be. They respond by pinching pennies, which means they buy less stuff from businesses that have to then lay off even more employees. It’s a self-sustaining cycle that leads to economic quicksand. A recession is defined as two or more consecutive quarters of economic decline as reflected in the GDP, and elevated unemployment is always part of the equation.

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