What Does the Broad Unemployment Rate Really Tell Us?
During the recent deep recession and slow recovery, U-6, an alternative measure of unemployment issued by the Bureau of Labor Statistics, has received increased attention. People often refer to U-6, which includes several groups of workers in addition to the officially unemployed, as the “broad unemployment rate.” No doubt part of its popularity stems from the simple fact that the broad measure of joblessness makes the employment situation look worse than the standard one, and bad news attracts readers and viewers. Beyond that, though, just what does U-6 really add to our understanding of labor market conditions?
What U-6 Tells Us
The main contribution of U-6 is to remind us that those whom the BLS defines as unemployed — those who are not working for pay even an hour a week but have looked for work within the last four weeks — are not the only ones who suffer when labor markets are weak. U-6 brings in two groups of people who feel labor market distress even though they do not fit the official definition of unemployed.
Those who are working part-time “for economic reasons,” that is, who would prefer to work full time but are not doing so because they cannot find a full-time job or because their employer has cut their hours. Further, those who are “marginally attached to the labor force,” that is, who would like a job, are available for work, and have looked for work in the past year but not in the past four weeks. “Discouraged workers” are a subset of the marginally attached who have not recently looked for work because they think none is available. The remaining marginally attached workers have other reasons for not actively looking for work. The BLS adds marginally attached workers to both the numerator and the denominator of U-6.