Donald Trump and Janet Yellen have very different ideas about the labor market

Donald Trump is well-known for making outlandish, unsubstantiated claims. Among his less prominent was an attack against improving employment statistics that Trump suggested were rigged.

Most egregiously, Trump claimed the unemployment rate, currently at 4.8%, was a "phony number," arguing the real figure could be as high as 42%, a statement with no evidence to back it up unless one were to dramatically change one's concept of unemployment.

Back in the real world, Federal Reserve officials are set to raise interest rates further this month. Why? Because Fed Chair Janet Yellen and her colleagues see the economy approaching what they consider "full employment" - the strongest the labor market can be without generating damaging inflationary pressures.

While the Fed sees "full employment" as a technical term, it doesn't ring quite true to the average American. After all, the economy was at the center of the electoral battle, and Trump appears to have made a strong case that things were not as good as they appeared.

The job market is certainly a lot better than it was during the depths of the Great Recession, which quickly destroyed some 9 million jobs that took several years to recover without even considering population growth. And it's certainly a far cry from the dire conditions concocted by Trump's misinformed imagination.

But that doesn't mean it's all roses, and those that have skepticism of the Fed's apparent notion that the labor market is as healthy as it could be may have a point. Here are a few key real, non-alternative, statistics, that show the labor market's underbelly still feels quite soft for an economic recovery that is nearly eight years old, while also being far from the horrible situation the president suggests.

The unemployment rate really is 4.8%

The official unemployment rate is exactly what the hard-working staff economists at the Bureau of Labor Statistics say it is. The headline unemployment number released by the BLS measures the percentage of Americans who "do not have a job, have actively looked for work in the prior four weeks, and are currently available for work," according to the Bureau.

The unemployment rate stood at 4.8% in January, meaning that 7.6 million Americans were actively looking for a job in the last four weeks but not finding work. The last bit here is key - anyone not looking for work is not counted as unemployed, even if they are just discouraged by a prolonged but failed job-hunt.

This measure of the health of the labor market is likely a big reason for the Fed's apparent optimism. The current jobless rate is not only quite low by historical standards, it's less than half its peak of 10% in October 2009, when the economy was just beginning to emerge from the Great Recession. Indeed, while the recovery was painfully slow for too many, President Barack Obama did preside over the longest period of uninterrupted job creation in history - over 11 million private sector jobs since 2008.

Underemployment is a bigger problem

Still, the widely cited headline figure, known as the U-3 jobless rate, doesn't tell the whole story. Another rate published by the government - one of six in total - is known as U-6, or "underemployment," and includes "total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons as a percent of the civilian labor force."

What that means in English is that this rate includes not only those who have actively looked for work without finding a job in the last four weeks, but also those who say they want a job but haven't been recently searching, as well as those forced to work part time or irregularly even though they would rather work full time. This rate is much higher, 9.4% in January, although, like the U-3 unemployment rate, the U-6 rate has been dropping slowly but steadily throughout the recovery.

Despite that improvement, the heightened underemployment rate shows that there are millions of Americans who, while not counted among the technically unemployed, are still far from having an ideal work situation.

The shrinking American labor force

So is that it? No. People who reported not actively looking for work in the preceding month are not counted in the labor force and thus drop out of the unemployment calculations. US labor force participation, which measures the percentage of the population over the age of 16 not in an institution like a nursing home or a prison that is either working or looking for work, has been declining since 2000.

The drop was aggravated severely by the worst recession in generations, which began in December 2007 and ended in the summer of 2009. The participation rate has fallen to nearly its lowest level in four decades, although it has mostly stabilized in the last couple years.

Economists disagree as to how much of the decline is due to demographic factors like an aging population and how much can be attributed to weaker labor markets.

So is Donald Trump right when he says 94 million Americans are not in the labor force but could be? Absolutely not. He was distorting the statistics by including literally everyone who doesn't work, including teenagers, the elderly, and stay-at-home parents.

The US labor force participation decline among 'prime age' men is uniquely bad compared to that seen in other rich countries, according to Jason Furman, former head of President Barack Obama's White House Council of Economic Advisers.

Although the proportion of Americans in their prime working years successfully holding a job has been recovering since the end of the recession, it still remains well below its late-90s heights, another potential warning sign that everything might not be as idyllic as the Fed seems to think.

A gulf between the races

One of the chronic issues in the US labor market is a troubling and persistent gap between the employment rates of whites and minorities. The white unemployment rate stood at 4.3% in January, compared to a black jobless rate of 7.7% and a Hispanic rate of 5.9%. The rates tend to rise and fall at the same time, but the gap fails to close - in fact, the white-black jobless rate differential has been effectively unchanged since 1954.

And as Jeff Guo of Wonkblog recently reported, the gap is actually understated by the 1.6 million Americans, disproportionately black, who are in America's swollen prison system and thus not even counted in the workforce statistics at all.

Neither Trump's dystopia nor the Fed's utopia

To be clear: none of this validates Trump's lies about the official statistics, or his effort to undermine faith in the numbers and institutions that produce them. Trump often tries to take credit for strong-arming companies into supposedly "saving" 1,000 jobs here and there, and holds high profile meetings to announce these "deals." But these are meaningless, minuscule figures considering the economy has been creating around 200,000 new jobs per month recently - and that's the net growth of millions of jobs created and cut each month.

Still, a deeper look at the real, factual statistics does put Yellen and the Fed's whole "full employment" concept in a less comforting, if more human, perspective.

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