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Is the Jobless Rate Really 7.8%?

Is the Jobless Rate Really 7.8%?
October 8, 2012
Ron DeLegge, Editor

Nationwide unemployment for September unexpectedly fell to 7.8%, causing conspiracy theorists like Jack Welch to argue the numbers are being rigged by the Obama administration.

The former General Electric executive tweeted:

“Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers.”

Although the masses and Jack Welch are fixated on the “headline” jobless rate of 7.8%, other data sets from the Bureau of Labor Statistics (BLS) paint a far more accurate and realistic picture of the job market. (VIDEO: 7-Years of Income Famine for Investors)

At, we regularly highlight the U-6 number (also known as the “under-employment” rate) because 1) the media consistently ignores it, and 2) it’s far more accurate picture of the labor market because it includes discouraged workers, marginally attached workers, plus workers that are forced to work part-time because they are not able to find a full-time job.

Since November 2008, the U-6 jobless rate has increased from 12.7% to 14.7%. By comparison, the much less complete U-3 number has increased from just 6.8% to 7.8%. But wait, there’s more!

The U-6 number – even with its more robust data set - still misses on many levels. For example, it fails to include another important segment of the work force: The self-employed un-employed worker. (Example: A self-employed real estate broker that can’t secure work.) If we added this demographic to today’s U-6 figure, real nationwide unemployment is probably closer to 17%! During the Great Depression era of the 1930s, the unemployment rate is estimated to have peaked at 25%.   

One final note, for conspiracy theorists everywhere: If you think a dip below 8% (U-3) gets Obama easily re-elected, think again. Only one president since World War II has been re-elected with the unemployment rate above 6%. And that was Ronald Reagan in 1984 when the U-3 jobless rate was 7.2%.

Here’s what it means: Even with a slight downtick in the U-3 rate to 7.8% in September, the statistical odds, in terms of the historical jobless rate, still do not favor Obama. Who knows, maybe that will lower Jack Welch’s blood pressure.  

Aside from the real jobless rate, the October issue of the ETF Profit Strategy Newsletter highlights 12 other mega investment themes that Wall Street has ignored and which ETFs to hold and which to fold.

Follow us on Twitter @ ETFguide

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JoeBiden said on October 11, 2012
  I agree with anything 'Bama says.
Mitt the Mitt said on October 10, 2012
  Hey Daniel, the charts don't support any accomplishments. As I see it, both data sets show higher unemployment compared to 2008. That's not what we call "better off" than 4 years ago.
Daniel P said on October 10, 2012
  This article actually highlights the accomplishment of the Obama administration related to turning the job market around - or at least stopping the bleeding. Regardless of which graph you look at, you'll note that all of the job loss is in the first 6 months of Obama's term and then has declined ever since. And if you go back to the previous 6 months you'll see this bubble began with Bush as we were experiencing almost 800k loss per month in the last 8 months of his term.
ObamaB said on October 08, 2012
  When unemployment is above 8% is Bush's fault but when its under that it's because of the sitting president. For now, I still have a job and so does Big Bird. But when/if Romney is elected...
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