The much anticipated unemployment number was released today and the Bureau of Labor Statistics reported that the rate dropped by two percentage points from 6.5% to 6.3%. In addition to the reduction in the rate, the number of non-farm payroll jobs produced last month came in at 217,000. Lower mortgage rates to remain low unemployment ratethan the previous month’s tally of 288,000 but still above the 200,000 mark.

In addition, the Bureau announced that payrolls surpassed the pre-recession levels for the first time. In response, the overall equities markets liked the news as the Dow, S&P and NASDAQ moved higher.

Long term mortgage rates reacted mildly as the jump in payroll was not enough for a major stock rally and rates essentially yawned at the news. As we mentioned in a previous post, while the drop in unemployment rate on a month to month basis was rather respectable but there are other factors going on that more economists consider beyond the front page number.

The unemployment rate is taken from data of those who are out of work but are actively looking. It does not count the number of those who have simply dropped out of the work force entirely. Those that have given up looking. This is the labor participation rate and it’s been at or new decades old highs for months now. But what about those workers who are working but have been downsized or placed on part time hours?

Perhaps a more precise measure of employment considers not just those out of work but looking but those that are underemployed. This is the so-called U-6 number and the unemployment rate using U-6 data shows unemployment for May came in at 12.2%, just under the previous month’s rate. That figure is twice the number the traditional unemployment rate. So which is the better number and which indicates a healthier economy? Economists say the U-6 rate and it does make more sense. Someone that was demoted to a lower position, lower pay or shorter hours are not where they want to be. And not where a healthy economy needs them.