So you think you're unemployed?

• Author: Adams, Tucker Hart
• Position: [the] ECONOMIST - Survey

The most closely watched but least useful statistic on the state of the economy is the unemployment rate. Early each month, the Bureau of Labor Statistics issues a report, and the headline usually focuses on the change in the unemployment rate.

We all fall into one of three categories - employed, unemployed or not in the labor force. If you are under 16 (there is no upper limit), confined to an institution (nursing home, prison, etc) or a member of the Armed Forces, you aren't in the labor force. You are also excluded if you have no job and aren't looking for one - for example, because you are in school, retired or have family responsibilities.

You are employed if you work for pay or profit (full-time or part-time). You are also considered employed if you work without pay for 15 hours or more per week in a family-owned enterprise operated by someone in your household.

You are unemployed if you do not have a job, have actively looked for work in the past four weeks and are currently available for work. If you have a job but are on vacation, sick, experiencing child-care problems, taking care of a personal or family obligation, on maternity or paternity leave, involved in a labor dispute or unable to get to work because of bad weather, you aren't counted as unemployed, even if you weren't paid.

There are two places where a cursory look at the data can be very misleading. The first has to do with employment. If you lose a terrific six-figure job with great benefits and go to work part-time at minimum wage with no benefits, your employment status is unchanged.

If you dig through the BLS data you will find statistics on the number of people working part-time for economic reasons (they wanted but were unable to find a full-time job), but that is seldom mentioned in the media reports. At the end of the third quarter there were 9.2 million workers in this category, almost 3 million more than there were a year earlier.

The second misleading figure is the unemployment rate. At first glance, it looks simple-you have a job, don't want a job or are looking for a job and hence unemployed. The catch is that to be considered unemployed you must have actively looked for a job in the past four weeks. This means you...