What is the U-6 (unemployment) rate?
The U-6 (unemployment) rate measures the percentage of the U.S. labor force that is unemployed, plus those who are underemployed, marginally attached to the workforce, and have given up looking for work. The U-6 rate is considered by many economists to be the most telling measure of the true state of the employment situation in the country.
Nevertheless, the most widely reported unemployment number is the U-3, often referred to simply as the unemployment report. The U3 only reveals the number of people who are unemployed and have looked for work in the last four weeks.
Both figures are released by the Bureau of Labor Statistics (BLS).
Key points to remember
- The U-6 (unemployment) rate is sometimes referred to as the “true” unemployment rate.
- The widely reported official unemployment rate, the U-3, only counts people who are currently unemployed and have looked for work in the past four weeks.
- The U-6 includes not only the unemployed but also the underemployed, the “discouraged” workers who have given up looking for work, and the “marginally attached” who have left the workforce but may return at some point.
- The U-6 is considered by many economists to be the most telling measure of a country’s employment situation.
- The U-3 rate and U-6 rate are released by the BLS in the monthly jobs report, which is used by market watchers to gauge the health of the economy.
Understanding the U-6 (unemployment) rate
The official unemployment rate used by the US government and published by the Bureau of Labor Statistics (BLS) is the U-3 rate. This is the percentage of the total labor force that is unemployed and has actively looked for work in the past four weeks.
The part of the unemployed who have not looked for a job in the last four weeks is defined as “marginally attached” and is no longer counted as unemployed.
This marginally attached group includes the unemployed who have looked for a job without success in the last twelve months. It also includes people who have returned to school or who have become disabled, in which case they may or may not return to the labor market at some point.
Composition of the U-6 tariff
The U-6 rate, on the other hand, takes this marginally attached percentage of the labor force into account in its calculation of unemployment.
The U-6 rate also includes underemployed people in its parameters. These are people who want full-time jobs but have settled for part-time jobs because of economic conditions. While the U-3 rate counts this category of workers as employed, the U-6 counts this group as unemployed.
Finally, the U-6 rate includes the “discouraged”: those who want a job but have given up looking.
The BLS publishes six monthly unemployment figures. The U-3 is the official rate and is the most widely quoted. The U-6 is a more comprehensive look at the state of American workers.
U-6 (unemployment) rate factors
Gallup, the data analytics firm, considers the U-6 rate to be “the true unemployment rate” and argues that the widely quoted U-3 rate does not accurately represent the reality of unemployment in America.
Gallup notes that an engineer or other skilled professional who takes a low-paying part-time job to survive would not be counted in the official unemployment rate, even if they earn only $20 a week.
Also, the U-3 rate does not include workers who are employed but whose hours of work have been reduced.
All of the above are called “underemployed” and are included in the U-6 rate.
The U-3 also omits those who are unemployed but have not looked for work in the past four weeks. It is the “discouraged” workers that the U-6 reflects.
The St. Louis Fed (FRED) tracks the U-6 rate over time on its website.
His chart, based on BLS figures, shows a surprising U-6 rate of 22.9% in April 2020, during the first nationwide shutdown of COVID-19. The official U-3 rate at that time was 14.7%. In January 2020, the U-6 rate was only 6.9%. The official U-3 rate was 3.5%.
Sample U-6 (unemployment) rate
To calculate the official unemployment rate, the U-3, the BLS divides the total number of unemployed by the total number of labor force participants, then multiplies that number by 100.
For example, the monthly rate report for June 2019 showed that the total number of unemployed people was 6.0 million and the civilian labor force was 163.0 million. The U-3 unemployment rate was 3.7% (seasonally adjusted).
In the same January 2022 report, the number of people marginally attached to the labor force stood at 1.5 million, while the total number of workers in part-time employment for economic reasons was 3.7 million. . The U-6 unemployment rate was 7.1% (seasonally adjusted).
When calculating the U-6 rate, the marginally attached group is added to both the numerator (total unemployed) and the denominator (total labor force). Also, part-time workers are added to the numerator only, since they have already been included in the labor force.
The U-6 rate is considerably higher than the U-3 figure and arguably better reflects the health of the American workforce at the time.
Unemployment rates are not based on the number of people who have applied for unemployment. They are based on a survey of households in all regions of the United States
The COVID-19 effect
Since March 2020, the Bureau of Labor Statistics has added several questions to its household survey to measure the impact of the coronavirus pandemic on jobs.
Here is some of what he found in January 2022:
- 15.4% of employed Americans have telecommuted at least part of the time.
- 6 million people were unable to work because their employer closed or lost business due to the pandemic.
- 1.8 million have been unable to look for work due to the pandemic.
How is the U-6 (unemployment) rate calculated?
Unemployment statistics released at the beginning of each month by the Bureau of Labor Statistics are based on a survey of 60,000 households. This represents a total of approximately 110,000 people in approximately 2,000 geographic areas, both urban and rural. The survey is conducted by employees of the Census Bureau.
The calculation is simple:
- The number of people who report being unemployed but have looked for work in the past month, as a percentage of the total civilian labor force, is equal to the “official” or U-3 unemployment rate.
- The number of people who are unemployed, underemployed, unemployed but have given up looking for work or have temporarily left the labor market, as a percentage of the total civilian labor force, is equal to the “real” rate or U- 6.
Where can I find the U-6 (unemployment) rate by state?
The BLS publishes average annual unemployment figures for each state. This report includes the U-6 as well as the other five measures of unemployment. Figures for 2022 are published on the BLS website.
U-3 numbers for states, but not U-6 numbers, are posted monthly.
What are the 6 unemployment rates?
The U-1 unemployment rate is just one of six “alternative measures” of labor utilization in the United States that are released monthly by the Bureau of Labor Statistics.
Alternative measures include:
- U-1: The percentage of the civilian labor force that has been unemployed for 15 weeks or more.
- U-2: The percentage of the civilian workforce that lost their job or ended a temporary job.
- U-3: The percentage of the civilian labor force that is unemployed and has looked for work in the past four weeks.
- U-4: The number of unemployed plus the number of discouraged job seekers as a percentage of the total labor force.
- U-5: Total unemployed plus discouraged job seekers plus marginally attached workers, as a percentage of the total labor force.
- U-6: All persons counted in U-5 plus those working part-time due to economic conditions, as a percentage of the total labor force.
The U-3 unemployment rate is reported monthly and is carefully monitored and tracked as a key indicator of the health of the US economy.
The U-6 rate offers a broader understanding of the true health of the economy.
How many people are jostling for part-time jobs because they can’t get a full-time position? How many people have given up even trying to find a job? How many left the labor market, hoping to return when the situation improves?
The U-3 number does not include any of these people, but the U-6 rate does.
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