Throwing cold water on the government’s employment data

September 6, 2012, 7:36 PM UTC

FORTUNE – When the government on Friday releases another monthly report on the state of the jobs market, a flood of economists and analysts will be dissecting the unemployment rate. And as expected, plenty will question how the U.S. Labor Department comes up with its dizzying numbers.

The jobless rate has hovered above 8% for the past few years, but it feels so much worse. Doesn’t it?

Now a newly-developed barometer of America’s job market confirms that’s more than just our gut feeling. Research consulting firm Gallup (the same folks who conduct public opinion polls) calculates there are far fewer people with jobs than what the government estimates. What’s more, it suggests the government has been diagnosing the scale of unemployment all wrong.

What it boils down to is who actually has a real job? The babysitter who spends an hour a week watching over the neighbor’s kids? The banker logging 60-hour work weeks? A dog walker tasked with taking Spot out for an hour each day?

MORE: America’s workers: A year of ups and downs

If it were up to the labor department, it would count all these folks technically employed. Gallup takes issue with that, however. In its new measure of the share of the population with jobs, Gallup takes into account the quality of jobs people have and assumes full-time work (which it considers at least 30 hours per week) is generally superior over part-time work.

It’s easy to see why. Part-timers are less likely to enjoy the kind of security and benefits that full-timers typically receive. And just because Americans have a job – any odd job – it doesn’t necessarily mean they’re any happier or that the economy is doing any better. So unlike the Labor Department, Gallup figures it only makes sense to count full-timers and leave out part-timers in coming up with its employment rate. By contrast, the Labor Department counts both – just so long as they work at least an hour a week.

By Gallup’s measure, 41% of Americans were employed in 2011; in 2010, it was 44% and so far this year it has hovered around 43%. That’s markedly lower than the government’s estimated employment-to-population ratio of 58%, which reflects both full-timers and part-timers. It has hovered at about the same rate since at least last July.

This certainly sounds bad, but Americans are more likely to have full-time jobs than most people in the world. Globally, the U.S. ranks no. 16 in its share of people with jobs relative to the rest of the population at least 15 years old, according to Gallup. Our employment rate fares better than troubled countries in Europe: United Kingdom (36%), Spain (33%), Germany (32%), Ireland (30%), France (26%), Italy (25%), Greece (23%). And while China is often in the spotlight for its rapidly growing economy (albeit, slowing), its employment rate ranks far lower at No. 55 with 28%.

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Admittedly, it’s probably unfair that Gallup discounts part-timers. Since the end of the Great Recession, many companies uncertain about the economy hired new workers on a part-time basis until things looked better. An uptick in part-time hiring could sometimes signal that more jobs will be created down the road. And besides, statistics show more of those working part-time don’t mind it and aren’t necessarily looking for full-time gigs.

As the jobs market continues to slog through, it’s only fair to question what the government’s numbers are telling us. Starting with who exactly has a decent job?