Updated 5/04/2012

What is U-6 Unemployment?

You would think that defining unemployment would be easy. If you don’t have a job you are unemployed… right? But what about retired people? Or people who don’t want a job? These considerations have caused the U.S. Bureau of Labor Statistics (BLS) to come up with six different measures of unemployment, U1 through U6.  U3 is the generally accepted commonly quoted “Unemployment Rate”.

“U” Classifications of Unemployment U1 through U6

U-1 is the narrowest definition of unemployment and U-6 is the broadest measure of unemployment. U-6 includes all classes of Unemployed even those considered  ”marginally attached” and/or part-time for economic reasons. In other words, those who would like a full-time job but can only find part-time work. Or perhaps they were working a full-time job and their employer cut their hours rather than actually laying off employees.

According to the BLS,  persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work (in other words they want a job but don’t think there are any available so they don’t even look). Persons employed part-time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.

The Bureau of Labor Statistics also calculates Unemployment rates in “Seasonally Adjusted” and “Non-Seasonally Adjusted” versions. To see how they compare see How Does the Unadjusted Unemployment Rate Compare to the Seasonally Adjusted Unemployment Rate? 

The six classifications of unemployment that the Bureau of Labor Statistics tracks are:

U1: Percentage of labor force unemployed 15 weeks or longer.

U2: Percentage of labor force who lost jobs or completed temporary work.

U3: Official unemployment rate per the International Labor Organization definition. It occurs when people are without jobs and they have actively looked for work within the past four weeks.

U4: U3 + “discouraged workers”, or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.

U5: U4 + other “marginally attached workers”, or “loosely attached workers”, or those who “would like” and are able to work, but have not looked for work recently.

U6: U5 + Part time workers who want to work full-time, but cannot due to economic reasons.

Data Tables are available from the U.S. Bureau of Labor Statistics for U1 - U6.

The following chart is a comparison of the Official Unemployment Rate U-3 to the broader U-6 Unemployment rate. We can see that U-6 is always higher than the often quoted U-3 “Unemployment Rate”.

Current Commentary:

The current not seasonally adjusted U-3 standard unemployment rate is 7.7% down from 8.3% in December. While the “Seasonally Adjusted” numbers are telling the rate is 8.1%. The Gallup Pole people do a daily survey of people to determine the unemployment rate and their non-adjusted numbers are saying the real unadjusted unemployment rate is 8.3%.

See Is the Government Fudging Unemployment Numbers?  for the comparison of Gallup numbers vs. Bureau of Labor Statistics numbers.

 As you can see from the chart above the unadjusted U6 is down from 15.2% in December to 14.1% in April. Interestingly, if you look at the chart carefully you will see that the U-3 unemployment rate at above 8% is  significantly higher than the U-6 unemployment rate during the 1999 -2001 period  and marginally higher than the U-6 rate from 2006-2008. You may also notice that when unemployment rises the gap between U-3 and U-6 also rises. For instance, in October 2000, unemployment was at the lowest levels on this chart with U-3  at 3.6% and U-6 was at 6.3%. For a difference of only 2.7%.  But  at the peak of unemployment in January 2010 U-3 was at 10.6% but U-6 shot all the way up to 18% for a difference of 7.4%.

Logically, this makes sense as times get really bad more people give up looking for jobs. When times are good and jobs are plentiful anyone who really wants a job can get one.  But this leads us back to the question… Why do we have a U-3 number at all? Aren’t all U-6 people unemployed? But during bad times like the recent few years it is scary to hear the Unemployment rate is 18% (U-6) but less scary if the number you hear is “only” 10.6% (U-3).

Unemployment Rate Chart – The seasonally adjusted unemployment rate from 1948 to the present is one of the most watched statistics. Where is it now and should you trust it?

Current Employment Data – How many jobs are there actually? This chart shows Employment since Jan 2000 and what the current trend is.

Historical Employment Data Chart- How Many People Are Actually Employed? This chart shows the actual employment rate without all the mumbo jumbo. It gives a clear picture of  the employment level in the United States from 1939 to the Present. When employment is rising the ecomomy is growing. When the employment rate levels off or declines times are not so good. Take a look and see how employment rates correspond to recessions over time.

Misery Index- Created by economist Arthur Okun to help gauge the level of misery the average person is suffering. It is a combination of the inflation rate and the unemployment rate.