Reuters: U.S. jobless rate misses "hidden" unemployed

"The government agency that produces the data also publishes an alternative measure that tries to capture the hidden unemployed, those who are not included in the official unemployment rate for various statistical reasons.
That broader measure is dramatically higher, at 9.7 percent in May, compared with the official level of 5.6 percent.
That's an extra 5.96 million people, in addition to the 8.2 million "officially" unemployed, who are waiting on the sidelines and may at some point step back into the labor force.
Although it receives little notice, the adjusted jobless rate has important implications for Federal Reserve policy-makers because it suggests the job market will not tighten as quickly as some in the financial markets believe.
"It shows there is more slack in the labor market than appears on the surface and as job opportunities improve, we'll see people re-entering the labor force to search for work," said former Fed Governor Lyle Gramley.
"That means fears that inflation is about break out all over the place do not seem warranted," he said in an interview.
The Federal Reserve is widely expected to start raising interest rates later this month, as the economy recovers from the 2001 recession and job creation picks up. But the Fed can boost rates at a slower pace if inflation is not a big threat."