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).
• 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.