 Good morning Hank, it's Tuesday. So last week the Bureau of Labor Statistics announced that in the U.S. in December the unemployment rate was 4.7% close to the lowest it's been in 9 years and fairly close to the lowest it's been since the early 1970s. But you may have also heard that the real unemployment rate in the U.S. is 6% or 9.2% or 20% or even 38%. And to me this seems like one example among many of how in our current political discourse different people are reaching vastly different conclusions because they're all looking at different sets of data. And until we can agree on what the facts are, we can't meaningfully discuss what they mean. Let's start with that 38% number. This refers to the labor force participation rate, which is a measure of how many Americans over the age of 18 are either working or actively looking for work. Now as you can see, this rate has declined quite a bit over the last 20 years from over 67% to under 63%, but by far the biggest reason for this decline is that Americans are getting older, which means that a higher percentage of them have retired. But even if you look at the labor force participation rates of people between the ages of 25 and 54, that rate has also declined about 1.5% since the Great Recession and about 3.5% since its height in the late 1990s. What's the deal there? Well the two biggest factors seem to be more people choosing to be full-time parents and more students in professional and graduate schools. According to the most recent data, 90 of the 95 million Americans not in the workforce say they do not want a job now. But the remaining 5 million people, of course, is a lot of people like it's 3% of the total U.S. labor force. And some portion of declining labor participation is probably due to lack of job opportunities. People might have retired earlier than they otherwise would have because they lost a job or they might be in graduate school but they could be tempted into the workforce for the right opportunity, etc. Now smart people disagree about how much of the declining labor participation is attributable to the economy, but on its own that statistic does not tell us much about unemployment. For one thing, the labor force participation rate will continue to decline as the population continues to age whether the economy is good or bad. But also if you're going to claim that the real U.S. unemployment rate is 38%, that means that back in 1967 it was 41% and that the lowest the U.S. unemployment rate has ever been is 33% in 2000. So let's move on to actual measures of unemployment. Every month the U.S. Census Bureau surveys 60,000 households to find out how many people are out of work. And then on the first Friday of every month they release six different unemployment rates because nothing is ever easy, but for our purposes only four of them matter. First you have U3 which is the official unemployment number. It includes all adult civilians who are without work and have looked for a job within the last four weeks. That's the number that's currently 4.7%. Then you have U4 which adds in so-called discouraged workers, people who are without jobs but have stopped looking for work because they don't believe there are any jobs they can get. Adding them in raises the current unemployment rate to 5% and then U5 adds in so-called marginally attached workers who are people who want to be in the workforce but haven't recently sought jobs because they're taking care of family responsibilities or taking classes and they bring the unemployment rate up to 5.7%. And then lastly U6 includes people who work part-time but want to be working full-time, including them brings the current unemployment rate to 9.2%. So which of these is the real unemployment rate? Well it depends on what you're trying to measure. The U3 number is useful for one thing because it's closely aligned with international standards which allows us to compare our unemployment rate to that of other countries. Like in Brazil a similar measure has the unemployment rate at 12%. In Germany it's 4.1%. In Spain it's 19%. But the U6 number is also useful because it helps us to understand how much so-called slack there is in the labor market that is how much room there is for job growth. As you can see U3 and U6 basically track together but there are slight differences. Like the distance between U3 and U6 is currently slightly higher than it was before the 2009 recession indicating that there may be more room for job growth than the U3 number would have us conclude. The most important thing though is that when talking about our unemployment rate we can't compare oranges with grapefruits and unfortunately that's happening a lot in our political conversations right now. You might hear for instance that at the height of the recession unemployment was 10% and now it's only down to 9.2% but that's mixing unemployment measures. If the unemployment rate is currently 9.2% it was 17% at the height of the recession and if it was 10% at the recession's peak it is currently 4.7%. By either measure the unemployment rate in the United States is lower than the average has been since World War II but it's still somewhat higher than full employment. But of course that's only part of the picture because people don't just need jobs they need good ones. On that front the recovery from the recession is probably still unfinished, median household incomes are likely still lower than they were in 2007 although we don't have the final data for 2016 yet. So in summary no matter how you measure it U.S. unemployment is low but could be lower and median household income is rising but not yet to all-time highs. If we can agree on these facts maybe we can move forward with a discussion about how to continue or even expand this economic recovery. Okay non-American nerdfighters I am sorry that this was such an American video but we're having just a smidge of a political discourse crisis over here. Let me know in comments what non-American topics I could cover next week to make it up to you. Okay Hank I'm off to go see the movie Hidden Figures for a second time because I liked it that much. Maybe also let me know in comments what your favorite Oscar contending movies are. My favorites are Hidden Figures and Moonlight. Hank thanks for keeping me employed all these years. I'll see you on Friday.