The U6 Unemployment Report Is A Great Leading Indicator

Historically, the U6 unemployment report has moved higher prior to the unemployment report moving higher into every recession. It is a great leading indicator. Verified Investing warned of this months ago, we are now seeing the results as the economy weakens substantially.

The U6 unemployment report is a measure of labor underutilization in the United States, considered by many to be a more comprehensive indicator of unemployment than the more commonly cited U3 rate.

What the U6 Includes:

• Total unemployed: This is the same as the U3 rate and includes people who are actively looking for work but currently don't have a job.
• Discouraged workers: These are individuals who want a job but have given up searching because they believe no jobs are available for them.  
• Marginally attached workers: This group includes discouraged workers and those who want to work but haven't looked for a job in the past four weeks for reasons other than believing there are no jobs available (e.g., family responsibilities, illness).
• Underemployed workers: These are people who are working part-time but would prefer to work full-time if they could find full-time employment.

How the U6 is Calculated:

The U6 rate is calculated by taking the total number of unemployed, discouraged workers, marginally attached workers, and underemployed workers and dividing it by the total labor force plus all marginally attached workers.

Why the U6 is Important:

The U6 rate provides a more comprehensive picture of the labor market than the U3 rate. It includes those who have given up looking for work or are working part-time but want full-time work. This gives policymakers and economists a better understanding of the true level of slack in the labor market.  

Current U6 Rate:

The U6 unemployment rate for July 2024 was 8.2% (7.8% seasonally adjusted), according to the Bureau of Labor Statistics (BLS). This means that 8.2% (7.8% seasonally adjusted) of the potential workforce was either unemployed, underemployed, or marginally attached to the labor force