A Good Description of the U-6 Unemployment Rate
Below is a brief description of U-6, which is the broadest measure unemployment rate currently used by the Dept. of Labor. From WSJ Real-Time Economics. If you really want to dig into the numbers see the BLS,
Job losses moderated in August, but the unemployment rate ticked up 0.3 percentage point to 9.7%, the highest level since June 1983.
But another more comprehensive gauge of unemployment ticked up even more. The government’s broader measure, known as the “U-6″ for its data classification, hit 16.8% in August, 0.5 percentage points higher than July.
The comprehensive measure of labor underutilization accounts for people who have stopped looking for work or who can’t find full-time jobs. The index had declined last month, along with the headline unemployment rate. That decline was sparked by more people dropping out of the labor force. This month the labor force increased by 73,000 people and the plunge in employment was larger in the household survey, which is used to calculate the jobless rate, than in the payroll survey used to calculate the change in nonfarm payrolls.
The U-6 figure is the highest since the Labor Department started this particular data series in 1994. But, similar to the headline unemployment rate, it likely isn’t as bad as it was in the 1980s. U-6 only goes back to 1994, but a discontinued measure has a longer history. That old U-6 measure peaked at 14.3% in 1982. Through some calculation, a comparable measure can be determined in the current report. Under the old U-6 methodology, the August rate would be 13.3%, the highest rate since 1983, but still below the peak.
Still, the elevated U-6 rate gives a clearer picture of the broader employment situation. The 9.7% 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 the end of this year, and the broader rate could easily 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.