What’s the “official” unemployment rate vs. economic reality?

In my analysis of the monthly jobs reports on the first Friday of the month, I make a statement similar to this: 

“The official unemployment rate is 5.0%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is 9.9%. Some of those dropping out of the labor force retired because they wanted to retire. The rest is disability fraud, forced retirement, discouraged workers, and kids moving back home because they cannot find a job.” 

There is no way to track disability fraud for sure, But I suspect it’s 75% of those on disability.

Hornstein-Kudlyak-Lange Non-Employment Index (NEI)

While not addressing disability fraud or forced retirement issues, Richmond Fed economists Andreas Hornstein and Marianna Kudlyak, and McGill University economist Fabian Lange came up with the Non-Employment Index (NEI) as a better way to track the true health of the labor market.