The U6 Unemployment Report Tells A More Truthful Tale
The U6 unemployment rate is a statistic published by the U.S. Bureau of Labor Statistics (BLS) that provides a broader measure of labor underutilization than the more commonly known U-3 unemployment rate (the official unemployment rate).
Here's a breakdown of what U6 encompasses:
- Total unemployed: This includes those who are actively seeking work but currently without a job (the same as U-3).
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Marginally attached to the labor force: These are people who want a job and have looked for work in the past 12 months but not in the last four weeks. They aren't counted as unemployed because they haven't actively searched recently.
- Discouraged workers: A subset of the marginally attached who have given up looking for work because they believe there are no jobs available for them.
- Part-time for economic reasons: These individuals are working part-time but would prefer full-time work and are available for it. They've settled for part-time due to economic reasons like not finding full-time positions or having their hours cut back.
Why is U6 important?
- More complete picture: U6 provides a more comprehensive view of the labor market by including those who are underemployed or have given up actively searching but still want to work.
- Reveals hidden slack: It can reveal hidden weakness in the labor market, even when the official U-3 rate appears low.
- Policy implications: U6 can inform policymakers about the true extent of labor underutilization, helping them design more effective economic policies.
Current U6 rate:
As of November 2024, the U-6 rate stands at 7.8%. This means that 7.8% of the U.S. labor force is unemployed, marginally attached, or working part-time for economic reasons. This number has risen sharply from early in 2024 signaling a slowing labor market.
By keeping an eye on the U6 rate, you can gain a deeper understanding of the labor market dynamics and potential economic challenges that may not be fully captured by the official unemployment rate.
