It’s no secret that this country is currently dealing with an unemployment crisis that has not been seen for several decades. Every day, we are bombarded with news reports and statistics that indicate things may be getting a little better, a little worse, or staying about the same. It can be very confusing when trying to discern what path our country is taking and what the prospects may be for our future.

By now, everyone has heard or knows of someone who has been laid off or had their income reduced in some way that will cause them financial hardship and stress. It is currently estimated that several million Americans are out of work. We hear daily that our current unemployment rate is a seasonally adjusted 9.1% and that we’re in a “jobless recovery.” The public is actually only receiving part of the story and when you take a little time to dig a little deeper, you may see that things are not really quite as they appear.

How is the unemployment rate determined?

The U.S. Department of Labor Bureau of Labor Statistics provides monthly reports on the current unemployment rates in the United States. The government actually reports six different versions of unemployment rates on a scale that ranges from U-1 to U-6. The U-3 is our official unemployment rate, which was previously mentioned to currently be 9.1% as of September 2011. This rate is defined by the Bureau of Labor Statistics as the total unemployed as a percent of the labor force and is the one reported most by the media.

An unemployment rate of 9.1% is considered high by normal post-World War II standards. To compare, an unemployment rate of 5% would be considered low as there is always a baseline unemployment rate to consider. The official unemployment rate has remained fairly steady for the last several months and has actually decreased from one year ago when it was a seasonally adjusted 9.6%. Things don’t seem really that bad, or are they?

Let us dig a little deeper. The U-6 unemployment rate, which some consider the real or more comprehensive unemployment rate, is currently at a seasonally adjusted 16.5% as of September 2011. One year ago, it was at a seasonally adjusted 17.1%. It declined to a seasonally adjusted 15.8% in May 2011 but has been increasing again as of September 2011. This rate is defined by the Bureau of Labor Statistics to be the total unemployed as a percent of the civilian labor force, plus those “marginally attached” including discouraged workers, and those working part-time who want full-time employment. What does this all mean? It means that the U-6 unemployment rate includes all the unemployed, the underemployed, and all those on the outside looking in.

Why is the U-6 unemployment rate not used or published as the official rate?

This is where differing opinions come in to play, but an unemployment rate of 16.5% looks really bad. The reporting of these statistics has very serious consequences financially, politically, and socially. Stock markets and interest rates change soon after these figures are released. Businesses make decisions based on this data. There are highly contested political campaign debates over the unemployment rate. Would that all change if the U-6 unemployment rate was reported? That is hard to say, and there is no explanation why one number is used over the other. Americans are spoonfed the lesser number, but maybe they should be told the real deal.

Americans who have been unemployed or underemployed may face considerable financial hardship, including economic stress and deteriorating credit. Once they find suitable employment, they can rebuild their finances and aggressively try to implement ways to improve credit scores. Until that time, the lesser “official” unemployment rate will continue to be reported, but those who have been affected know the real deal.