What is the U6 Unemployment Rate?
Define and analyze the U6 Unemployment Rate, a broader measure that includes various forms of labor underutilization.
The U6 Unemployment Rate is a broader measure of unemployment than the traditional U3 Unemployment Rate, which is more commonly reported. The U6 rate includes a wider range of labor force participants who are not fully employed or underemployed. Specifically, the U6 Unemployment Rate includes the following groups:
Unemployed: This category includes people who are actively seeking employment but have not been able to find a job. These individuals are counted in both the U3 and U6 rates.
Underemployed: The U6 rate also includes part-time workers who want and are available for full-time employment but are unable to find such opportunities. This group is often referred to as "involuntary part-time workers."
Marginally Attached Workers: This category includes individuals who want to work and are available for work but have not actively sought employment in the past four weeks. They are considered "marginally attached" to the labor force.
Discouraged Workers: Among the marginally attached workers, the U6 rate includes those who have given up on actively searching for a job because they believe there are no suitable opportunities available. These individuals are often referred to as "discouraged workers."
The U6 Unemployment Rate provides a more comprehensive view of labor market conditions because it accounts for individuals who are not fully employed, including those who are working part-time for economic reasons and those who have temporarily stopped looking for work but would still like to be employed. This broader measure is often used to assess the extent of underutilized labor resources in the economy.
The U3 Unemployment Rate, on the other hand, focuses primarily on individuals who are actively seeking employment and are currently unemployed, providing a narrower view of the labor market. Both U3 and U6 rates are reported by the U.S. Bureau of Labor Statistics and other labor market authorities to provide a more complete picture of employment and underemployment trends.
Exploring Broader Measures of Unemployment.
The official unemployment rate, U-3, is the most widely used measure of unemployment in the United States. It is calculated as the number of unemployed people divided by the labor force. The labor force is defined as all people 16 years of age and older who are either employed or actively seeking employment.
However, there are a number of reasons why the official unemployment rate may not be an accurate reflection of the true state of the labor market. For example, it does not include people who are discouraged from looking for work, or people who are employed part-time for economic reasons (i.e., they would prefer to work full-time but cannot find a full-time job).
To address these shortcomings, the Bureau of Labor Statistics (BLS) publishes a number of broader measures of unemployment. These measures include:
- U-4: Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers.
- U-5: Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force.
- U-6: Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.
Discouraged workers are people who are not currently looking for work because they believe they cannot find a job. Persons marginally attached to the labor force are people who are not currently working or looking for work, but who indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Employed part time for economic reasons are people who are working part-time because they cannot find a full-time job, or because their hours have been reduced for economic reasons.
In September 2023, the U-3 unemployment rate was 3.8%. However, the U-6 unemployment rate, which is the broadest measure of unemployment, was 7.0%. This means that an additional 3.2% of the labor force was either unemployed, discouraged from looking for work, employed part-time for economic reasons, or marginally attached to the labor force.
Broader measures of unemployment can be useful for policymakers and researchers who are trying to understand the true state of the labor market and the impact of economic policies. For example, if the official unemployment rate is low but the broader measures of unemployment are high, it may suggest that there is still a significant amount of slack in the labor market. This could lead policymakers to take steps to stimulate the economy and create jobs.
It is important to note that broader measures of unemployment are not perfect. For example, they can be difficult to measure accurately, and they can be influenced by factors such as demographics and economic conditions. However, they can provide a more complete picture of the labor market than the official unemployment rate alone.