What is the U-6 (unemployment) rate?

The proportion of the American labor force that is jobless, as well as those who are underemployed, just tangentially involved in the workforce, and have given up seeking work, is measured by the U-6 (unemployment) rate. Economists often regard the U-6 rate as the most indicative indicator of the actual status of the job situation in the country.

However, the U-3, often known as the unemployment report, is the unemployment figure that is more frequently publicized. Only the number of unemployed people who have looked for employment within the last four weeks is disclosed by the U3.

The Bureau of Labor Statistics (BLS) released both statistics.

Comprehending the U-6 Rate of Unemployment

The Bureau of Labor Statistics (BLS) released the U-3 rate as the official unemployment rate for the United States government. This represents the portion of the overall jobless labor force that has actively looked for work during the last four weeks.

“Marginally attached” refers to the percentage of the jobless that has not sought work in the previous four weeks and is thus no longer included in the unemployment statistics.

Those without jobs who have attempted and failed to find employment at some point in the previous year are included in that category of minimally connected individuals. It also includes those who have gone back to school or become incapacitated, in which case they could eventually make a comeback to the workforce.

Make-Up of the U-6 Rate

In contrast, the U-6 rate considers this marginally connected fraction of the labor force when calculating the unemployment rate.

The underemployed are included in the measurements of the U-6 rate. Because of the economy, some individuals have settled for part-time work even if they prefer full-time employment. The U-6 rate considers this group of workers to be unemployed, even though the U-3 rate views them as employed.

Lastly, the “discouraged”—those who want a job but have given up looking—are included in the U-6 rate.

The BLS releases six-monthly jobless statistics. The official rate, U-3, is most often cited. A more thorough examination of the status of American workers may be found in the U-6.

The U-6 (Unemployment) Rate’s Factors

According to data analytics company Gallup, the U-6 rate is “the real unemployment rate,” and the often-cited U-3 figure does not reflect the actual unemployment rate in the United States.

According to Gallup, even if they only earn $20 per week, an engineer or any other skilled worker working a low-paying part-time job to make ends meet would not be included in the official unemployment rate.

Furthermore, any employed individuals whose work hours decreased are not included in the U-3 rate.

Those above are classified as “underemployed” and are part of the U-6 rate.

Those who are jobless but have not sought employment in the last four weeks are likewise excluded from the U-3. The U-6 represents these “discouraged” laborers.

Following the U-6

The St. Louis Fed (FRED) graphs the U-6 rate over time on its website.

The shocking U-6 rate of 22.9% in April 2020, during the first nationwide COVID-19 shutdown, is seen in the graphic based on BLS data. At the time, the official U-3 rate was 14.7%.

An Illustration of the U-6 Rate of Unemployment

To calculate the official unemployment rate, or U-3, the BLS divides the total number of unemployed people by the total number of labor force participants.

For instance, the June 2019 monthly rate data showed 163.0 million people in the civilian labor force and 6.0 million jobless individuals overall. The seasonally adjusted U-3 unemployment rate was 3.7%.

In the same January 2022 study, 1.5 million people were classified as marginally linked to the labor force and 3.7 million as having part-time employment for financial reasons. The seasonally adjusted U-6 unemployment rate was 7.1%.

The marginally attached group is added to the denominator (total labor force) and numerator (total unemployment) to calculate the U-6 rate; furthermore, part-time employees are added to the numerator only because they have previously been included as labor force members.

The U-6 rate, far higher than the U-3 number, more accurately depicts the state of the American labor market at the time.

The number of people who have filed for unemployment benefits is not a factor in determining unemployment rates. They are based on a household survey conducted throughout the United States.

COVID-19’s Impact

The Bureau of Labor Statistics has been adding questions to its Household Survey since March 2020 to gauge how the coronavirus epidemic affects employment.

Some of the findings from January 2022 are as follows:

• 15.4% of working Americans do so, at least sometimes via telework.
• Due to their employers’ closures or loss of business due to the pandemic, six million individuals could not work.
• Because of the epidemic, 1.8 million people were unable to find employment.

How Is the Unemployment Rate, or U-6, Determined?

The Bureau of Labor Statistics bases its early-released monthly unemployment figures on a survey conducted among 60,000 homes. That equates to over 110,000 people spread throughout roughly 2,000 urban and rural geographic locations.

Employees of the Census Bureau carried out the survey.

The computation is simple to understand:

• The “official” or U-3 unemployment rate is equal to the proportion of the civilian working population that reports being jobless yet has actively sought employment during the last month.
• The “real” or U-6 rate is the proportion of the total civilian working population that is either jobless, underemployed, or unemployed but has given up seeking employment or has temporarily left the labor force.

Where Can I Find Each State’s U-6 (Unemployment) Rate?

The BLS releases every state’s yearly average unemployment rate. The U-6, as well as the other five unemployment metrics, are included in this report. The BLS website has the figures for 2022.

The states publish their U-3 figures monthly, not their U-6 numbers.

Which six unemployment rates are there?

The Bureau of Labor Statistics publishes six “alternative measures” of labor use in the United States each month, of which the U-1 unemployment rate is only one.

The substitute actions consist of the following:

• U-1: The proportion of the civilian workforce that has been jobless for at least 15 weeks.
• U-2: The proportion of the civilian labor force that has either finished temporary work or lost employment.
• U-3: The proportion of the civilian labor force that has looked for employment over the last four weeks but is jobless.
• U-4: The proportion of the labor force comprised of discouraged job seekers and the jobless.
• U-5: The proportion of the labor force comprises all jobless people, discouraged job searchers, and marginally connected workers.
• U-6: The whole population included in U-5 plus those employed part-time due to the economy, expressed as a proportion of the labor force.

The Final Word

Every month, the U-3 unemployment rate is released and closely monitored as a vital sign of the state of the American economy. An expanded perspective on the appropriate state of the economy may be gained from the U-6 rate.

How many individuals struggle to get full-time employment and instead clamor for part-time work? How many individuals are no longer even making an effort to find work? How many people have quit their jobs, hoping to return when things improve? None of the individuals are included in the U-3 number but in the U-6 rate.

Conclusion

• It was sometimes called the “real” unemployment rate; the U-6 rate measures joblessness.
• The U-3, the officially stated unemployment rate, only includes those who have searched for work during the last four weeks and are jobless.
• The “discouraged” workers who have given up seeking employment, the “marginally attached” workers who have left the labor but may return at some time, and the jobless and underemployed are all included in the U-6.
• Economists often regard the U-6 as the most informative indicator of a nation’s employment status.
• Market observers use the BLS’s monthly job report, which includes both the U-3 and U-6 rates, to assess the state of the economy.