The Invisible Population: What the Unemployment Rate Doesn’t Show

Unemployment's down, but accounting for penal growth, the black-white employment gap's significantly wider than it has been since 1980.

The unemployment rate is one of the key barometers of the American economy. Its recent decline from 8.1 to 7.8 percent in September—its lowest level since President Obama took office in January 2009—is consistent with claims of an economic recovery and with other data that show evidence of new job creation, increases in hours worked among the employed, and increases in wages. While this drop is good news—and likely gave Obama a boost at the polls—as optimistic as the new numbers may seem, the data used to construct the unemployment rate and other measures of economic progress don't include some of the most economically disadvantaged Americans: the 2.3 million people housed in federal, state, and local prisons and jails.

The unemployment rate is a relatively simple measure of labor surplus, representing the fraction of the total labor force that is not employed, but looking for work. It's also useful for employers determining wages, policymakers setting unemployment benefit levels, or politicians seeking a single number to characterize the health of the American economy. However, it doesn't capture underemployment, other forms of labor inactivity, or unpaid labor. It also doesn’t tell us anything about the employment prospects of some groups of the population most economically at-risk.

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