What is the U-6 Unemployment Rate?

Posted on by & filed under Nevada by the Numbers Blog.

During the recent recession and recovery, U-6, an alternative measure of unemployment issued by the Bureau of Labor Statistics, has been frequently cited in news stories. Reporters often refer to U-6, which includes several groups of workers in addition to the officially unemployed, as the “broad unemployment rate.” Prompted by a note from a reader, Nevada by the Numbers asks and answers the question,

What does the U-6 rate add to our understanding of labor market conditions?

The main rationale for the existence of the U-6 rate is to remind us that those who the BLS defines as unemployed—that is, those who are not working for pay but have actively looked for work within the last four weeks—are not the only people who suffer in weak labor markets.

U-6 includes two groups of people who feel labor market pain even though they do not fit the simple definition of unemployed:

  • Those who are working part-time for economic reasons, meaning they would prefer to work full time but are not doing so because they cannot find a full-time job or because their employer has reduced their hours.
  • Those who are marginally attached to the labor force, meaning those who would like a job, are available for work, and have looked for work in the past year, but have not looked for work in the past four weeks.
  • (Note:  “Discouraged workers” are an often-mentioned subset of the marginally attached who have not recently looked for work because they believe none is available. Other marginally attached workers may not look for work for other reasons including poor health, family responsibilities, school, or transportation problems.)

Is a worker who works even part-time better off than a worker working no hours at all? To a degree, yes — but, for example, if both were previously employed full time and the loss of income results in the loss of a home for both due to an inability to pay his/her mortgage, the effective difference is much the same.

The national U-6 rate last month was 12.2%, up from 12.1% in June. The high U-6 rate was 17.4% in October 2009, when the “official” (U-3) rate was 10.1%. This interactive chart shows the U-3 and U-6 rates for the last decade.