The U-6 (Unemployment) rate measures the percentage of the U.S. labor force that is unemployed, along with those underemployed, marginally attached to the workforce, and those who have stopped looking for work. Many economists consider the U-6 rate to be the most accurate reflection of the nation’s employment situation.
While the more commonly reported unemployment figure is the U-3 rate, which denotes only those who have been actively job-hunting in the past four weeks, both U-3 and U-6 rates are published by the Bureau of Labor Statistics (BLS).
Key Takeaways
- The U-6 (Unemployment) rate is sometimes referenced as the “real” unemployment rate.
- The officially reported U-3 unemployment rate counts only individuals who are currently unemployed and have actively looked for work in the past four weeks.
- The U-6 rate includes the unemployed, underemployed, those marginalized in their job search, and those who have given up looking for work altogether.
- Economists value the U-6 as a detailed measure of a nation’s employment climate.
- Both U-3 and U-6 rates are made available by the BLS in their monthly job report, a key economic health indicator.
Unveiling the U-6 (Unemployment) Rate
The official unemployment rate often cited by the U.S. government is the U-3 rate. It represents the percentage of the total labor force that is unemployed and has actively pursued work within the past four weeks.
Those who haven’t actively searched for a job within this period are categorized as “marginally attached” and are excluded from the U-3 count.
This marginally attached group comprises individuals who may have searched for work at some point in the last twelve months but have either returned to school, become disabled, or decided not to re-enter the labor force at present.
Composition of the U-6 Rate
However, the U-6 rate incorporates this marginally attached segment in its calculation of unemployment.
The U-6 rate also includes underemployed individuals—those seeking full-time jobs but currently in part-time employment due to economic constraints. While the U-3 rate counts underemployed workers as employed, the U-6 logic recognizes them as unemployed.
Additionally, the U-6 accounts for “discouraged” workers—people desiring work but who’ve abandoned the job search.
The BLS maintains six different monthly unemployment figures. While the U-3 represents the official rate and is most cited, the U-6 offers a broader perspective on the American workforce’s state.
Components Influencing the U-6 Rate
The prominent data analytics firm, Gallup, refers to the U-6 rate as the “real unemployment rate,” suggesting that the widely recognized U-3 rate does not wholly translate the actuality of joblessness in the U.S.
As Gallup explains, a skilled professional taking up a poorly-paying part-time position would not be included in the official unemployment rate, even if their earnings are as minimal as $20 per week.
Furthermore, the U-3 figure doesn’t factor in workers who’ve seen their hours reduced, categorizing them as underemployed instead.
In sum, those categories the U-3 overlooks are encapsulated within the U-6 rate, offering a more holistic view of the market and where it stands.
Tracking the U-6 Rate
The Federal Reserve Bank of St. Louis (FRED) monitors the U-6 rate over extended periods with publicly available data on its website.
An insightful instance comes from April 2020, during the early COVID-19 shutdowns, when the U-6 rate soared to 22.9% in stark contrast to the official U-3 rate of 14.7%. By looking back a month, in January 2020, the U-6 stood at 6.9%, while the U-3 was at an economic low of 3.5%.
Real-World Example of the U-6 (Unemployment) Rate
To compute the U-3 official unemployment rate, the BLS divides the total number of unemployed people by the total labor force, then multiplies that figure by 100.
For example, the June 2019 monthly report recorded 6.0 million unemployed individuals within a 163.0 million-strong labor force, generating a U-3 unemployment rate of 3.7% (seasonally adjusted).
Margin-added calculations for January 2022 reported 1.5 million marginally-attached workforce members and 3.7 million underemployed part-time workers. The resulting U-6 rate was 7.1% (seasonally adjusted).
In calculating the U-6, the marginally attached add up to both the numerator (total unemployed) and denominator (total labor force). However, part-time workers are added solely to the numerator, as they are already included as part of the broader labor force.
The higher U-6 rate, notably more substantial than the U-3, often reflects the actual conditions better regarding workforce health in America.
The COVID-19 Pandemic’s Impact
Since the onset of COVID-19 in March 2020, the Bureau of Labor Statistics has included additional questions in its Household Survey to gauge the pandemic’s labor market impacts.
For example, insights from January 2022 revealed:
- 15.4% of the employed were working remotely at least partially.
- 6 million individuals were unable to work because their employers had closed or scaled down due to the pandemic.
- 1.8 million people were unable to job-hunt due to pandemic-related reasons.
Calculating the U-6 (Unemployment) Rate
The BLS compiles its monthly unemployment statistics based on a survey of 60,000 households, representing about 110,000 individuals spread across roughly 2,000 diverse geographic zones.
Calculation Process:
- The percentage of individuals who are jobless but have searched for work in the past month from the total civilian working population constitutes the “official” or U-3 rate.
- The U-6 rate counts the unemployed, underemployed, jobless individuals who’ve ceased job-searching, and those temporarily out of the workforce, expressed as a share of the total civilian labor force.
Where Can the U-6 (Unemployment) Rate by State be Located?
The BLS presents annual average unemployment figures for each state, inclusive of the U-6 rate and the five other unemployment metrics. The latest data for 2022 can be found on the BLS website.
Monthly U-3 figures for states are also available, although U-6 specifics are reported annually.
The Six Alternative Unemployment Rates Explained
The U-1 unemployment rate is among six “alternative measures” of labor utilization published monthly by the Bureau of Labor Statistics.
Here’s a breakdown:
- U-1: Percentage of the labor force unemployed for 15 weeks or longer.
- U-2: Percentage of the labor force who lost jobs or finished temporary assignments.
- U-3: The portion of the labor force unemployed and actively seeking work in the last four weeks.
- U-4: Unemployed count added to discouraged job-seekers, divided by the total labor force.
- U-5: Combines unemployed, discouraged job-seekers, and other marginally attached workers, calculated as a percentage of the total labor force.
- U-6: The sum of all groups counted in U-5 plus those working part-time due to economic constraints.
Conclusion
The U-3 unemployment rate, as reported monthly, serves as a vital health indicator for the U.S. economy.
However, the U-6 rate provides a more extensive understanding of the actual employment situation.
- How many individuals are turning to part-time jobs only because they can’t secure a full-time role?
- How many have stopped their job search entirely?
- Do some hope to rejoin the workforce amid better conditions?
While the U-3 omits these categories, the U-6 rate includes them, offering a broader look at employment health.
Related Terms: U-3 rate, Bureau of Labor Statistics, underemployment, discouraged workers.
References
- U.S. Bureau of Labor Statistics. “Economic News Release: Table A-15. Alternative Measures of Labor Underutilization.”
- U.S. Bureau of Labor Statistics. “Local Area Unemployment Statistics: Alternative Measures of Labor Underutilization for States, Third Quarter of 2021 Through Second Quarter of 2022 Averages”.
- Gallup. “Real Unemployment-Department of Labor (U-6)”.
- U.S. Bureau of Labor Statistics. “News Release: The Employment Situation-April 2020”, Page 29.
- U.S. Bureau of Labor Statistics. “TED: The Economics Daily: U-3 Was 6.1 Percent, U-6 Was 10.4 Percent, in April 2021”.
- St. Louis Fed. “U-6, 1994-2022”.
- U.S. Bureau of Labor Statistics. “The Employment Situation-June 2019”.
- U.S. Bureau of Labor Statistics. “The Employment Situation: January 2022”.
- U.S. Bureau of Labor Statistics. “Labor Force Statistics from the Current Population Survey”.
- U.S. Bureau of Labor Statistics. “Current Unemployment Rates for States and Historical Highs/Lows”.
- U.S. Bureau of Labor Statistics. “Local Area Unemployment Statistics”.
