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July 22, 2015

In June 2015, San Diego County’s unemployment rate was 5 percent, down from 6.4 percent in June 2014, and significantly below the highest unemployment rate of the Great Recession, which came in at 11.1 percent in January 2010.

While this lower unemployment rate signifies that the economy is recovering from the Great Recession, this number does not tell the whole story. A recent decline in labor force participation may explain the significant drop in the unemployment rate. At the start of the recession in 2008, the labor force participation rate was 77 percent in San Diego County. In 2014, the labor force participation rate was down to 69 percent. The labor force participation rate is calculated by dividing the number of people who are in the labor force by the total working-age population.

Additionally, the officially reported unemployment rate (which the U.S. Bureau of Labor Statistics labels as the “U-3” measure) has limitations in the way it is calculated. The official rate only takes into account the number of people currently employed plus those who have actively sought employment in the past four weeks. It does not include people who are marginally attached to the labor force, part-timers who are looking for full-time work, or discouraged workers who left the labor force or gave up on searching for a job.

A more accurate measure of true unemployment is the U.S. Bureau of Labor Statistics’ “U-6” measure, which takes these other groups into account. SDWP’s Research Department estimates that San Diego County’s U-6 unemployment rate was 12.1 percent in June 2015, which indicates that the real rate of unemployment is much higher than the officially reported 5 percent. [1]

The U-6 rate is still much higher than pre-recession levels, even though the U-3 rate has mostly recovered. Part of this may be due to the low level of labor force participation. Another part could be due to those who are currently working part time, but would prefer to work full-time–these individuals are included in the U-6 number. “Involuntary part-time employment represents idle labor resources, or labor market slack,” says Rob Valletta and Catherine van der List of the Federal Reserve Bank of San Francisco. [2]

While the traditionally reported unemployment rate shows great promise for economic recovery, we must keep in mind those who are still behind in the recovery.

For unemployment data (both U-3 and U-6) that is updated on a regular basis, visit SDWP’s labor market information dashboard:

[1] Calculation based on U-3 reported rate for San Diego County, and the U-3 and U-6 reported rates for California and the United States.
[2] Valletta, Rob and van der List, Catherine. “Involuntary Part-Time Work: Here to Stay?” Federal Reserve Bank of San Francisco.

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