The Official Unemployment Rate Hit 8.5% in March, But U-6 Was 15.6%
The definitions for the official unemployment rate and U-6 are given below. Last summer I thought an unemployment rate of 9% would be reached by the end of 2009. I would argue that we will reach 9% by early summer and probably hit about 10% by year end. My fear is that we will even after the recovery starts unemployment will remain sluggishly high much like the end of the last two recessions. Text in bold is my emphasis. From the WSJ Economics Page:
Americans are giving up on their job searches at a faster pace. The nation's official unemployment rate jumped to 8.5% in March from 8.1%, putting U.S. joblessness at its highest since November 1983.
But the Labor Department's most comprehensive gauge of unemployment surpassed even its early 1980s levels. The government's broader measure, known as the “U-6″ for its data classification, hit 15.6% in March - a big leap from 14.8% in February.
The comprehensive measure of labor underutilization accounts for people who have stopped looking for work or who can't find full-time jobs. The March figure is the highest since the Labor Department started this particular data series in 1994. It's also above a discontinued and even broader measure that hit 15% in late 1982, when the official unemployment rate was 10.8%. (That data series goes back to the 1970s.)
The 8.5% unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things.
The U-6 figure includes everyone in the official rate plus “marginally attached workers” - those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that's all they could find.
Many forecasters expect the official unemployment rate to top 10% by early next year. If the path of the broader unemployment rate continues, it's likely to top 18%. For people in this group, comparisons to the Great Depression (when 25% of Americans were out of work) may not look so wild even if overall economic activity is holding up better.