(Topics: The Economy | Back to Home)

When people talk about the “unemployment rate” it sounds simple: the percentage of people who are not currently working. But that's not at all what it is, and we need to think about unemployment in a more comprehensive way.

First, it's easy to divide people into two categories: working and not working. But of the people who are working, there are several subcategories:

• Working full-time for an employer
• Working part-time for an employer
• Working for themselves as a business owner or sub-contractor

(Not to mention people who have several part-time jobs that all add up to a full-time job.)

Also, what about people who are not working? Some of them are:

• Retired
• Attending school
• Children
• Persons with a disability

So the unemployment rate isn't actually people who are, literally, not employed. It's more subtle than that [1]. But when you hear the current unemployment rate is 5.5% or 4.2% or 6.3% or 8.0%, you need to know what it means. Because the unemployment rate is one window into how the economy works.

Unemployment isn't so much a measure of people, it is the shadow cast by the job market. There are two pieces of data that drive the unemployment number: (a) how many people are working, and (b) how much those people enjoy their jobs.

Why is job satisfaction a factor? Because if people don't like their jobs, they will quit. They will live off savings, or cut expenses, and eventually find another job.

So to explain:

As I write this, we have a medium-low national unemployment rate of 5.2%. That generally means that while lots of people are working, many people in general are not satisfied with their current jobs or the job market.

This chart is of course an over simplification. But it's a better description than looking at the unemployment rate all by itself.

Because job satisfaction has a huge impact on the unemployment rate. And one of the biggest factors in how much we feel good about our jobs is dictated by the cost of living and the minimum wage.

[1] The traditional measure is called U-3. A person is counted as unemployed if they do not have a full-time, part-time, or temporary job, and they are is actively looking for a job within the last four weeks, and they currently available to be hired. U-3 also includes people who were recently laid off. It does not include people who are unemployed but have not looked recently, or people who believe that they cannot get a job due to a lack of opportunities in their field.