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Mar 18 2009   5:22PM GMT

Alternative Measures of Labor Underutilization

Ed Tittel Ed Tittel Profile: Ed Tittel

How do you measure unemployment? Well, that depends. In fact, the US Bureau of Labor Statistics tracks no fewer than six such measures, though it reports only on one of them as “the official unemployment rate.” These measures are known as U1 through U6, where U3 corrresponds to official unemployment. Here’s how those measures are defined at the BLS:

  • U-1, persons unemployed 15 weeks or longer, as a percent of the civilian labor force;
  • U-2, job losers and persons who completed temporary jobs, as a percent of the civilian labor force;
  • U-3, total unemployed, as a percent of the civilian labor force (this is the definition used for the official unemployment rate);
  • 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 marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers; and
  • U-6, total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.

As the explanations should verify, these measures increase monotonically as the U-number goes up, so that U1 < U2 < … < U6. For me because U6 is the comprehensive and sweeping measure, it’s also the most interesting and (for me at least) the most likely to indicate how many people consider themselves to be unemployed or underemployed.

If you take a look at the 2008 annual averages you’ll see some pretty sobering numbers by state and territory as well (including the District of Columbia, but not the outlying US territories nor Puerto Rico). Michigan tops the list with a truly scary 15.1% but 26 out of 51 entries come in at 10.1% or higher. No wonder a key priority in restarting our economy has to be putting people back to work: with at least one in 10 who could be in the workforce not all the way into the workforce, that could provide a big infusion of income at the macro level, and make millions of un- and underemployed Americans real wage earners once again.

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