Current U-6 Unemployment Rate

Current U-6 Unemployment Rate is 10.3% (BLS) and 14.2% (Gallup)

Current U-6 Unemployment Rate:

U3 Unemployment vs U6For August 2015 the official U-6 unemployment rate fell  from 10.7% in July to 10.3% in August. The independently produced Gallup equivalent called the “Underemployment Rate” fell from  14.4% in July to 14.2% in August.

The current differential between Gallup and BLS on supposedly the same data is 3.9%!

What is U-6?

U-6 is a broader measure of unemployment including discouraged workers and many consider U-6 to be”the Real Unemployment Rate” See: What is U-6 Unemployment? for the full definition of U-6 Unemployment.

As you can see from the chart below, the unadjusted U-6 unemployment rate was 15.2% in December 2011 and 14.4% in December 2012. By July it bounced up again to  15.2% and in October the U-6 miraculously fell back to 13.9% just in time for the election. But by January 2013 it was back to 15.4%. By January 2014 it was at 13.5% and by October 2014 it was down to the 11% range. In January 2015 it bounced back up to 12% but promptly returned to 10.4% by April.

Currently Gallup estimates it to be more like 14.4% as of July 2015.

Comparing U3 to U6

If you look at the chart below carefully you will see that the current (Unadjusted)  U-3 unemployment rate is 5.2% which is significantly above the U-3 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%.

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”.

U3 compared to U6 UnemploymentClick for larger Image

 This is primarily because as times get more difficult, increasingly people give up looking for jobs. When the good times are rolling and jobs are plentiful it is easy to get a job so even the causal applicant will have a job.  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) so the government prefers the U-3 number and unfortunately the news media plays along and uses the U-3 number because it is the “Official” unemployment rate.

In the chart below we have subtracted the U3 unemployment rate from the U6 unemployment rate and so we see the differential. When the differential is low it is easier to find a job (i.e. everyone who wants one can find one).

U6-minus-U3 UnemploymentClick for larger Image

For More information: 

How do Gallup unemployment numbers compare to Bureau of Labor Statistics numbers. See: Is the Government Fudging Unemployment Numbers?

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? See: Unemployment Rate Chart

How many jobs are there actually? This chart shows Employment since Jan 2000 and what the current trend is and may be more accurate than the unemployment numbers. Current Employment Data

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 economy 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.

 

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Source: U.S. Bureau of Labor Statistics- U-6 Unemployment Rate

Comments

  1. michael reiter says:

    You are right! The U-6 rate should be the true unemployment rate, not U-3!

  2. Windriven says:

    Unemployment numbers are useful but incomplete. Income and especially disposable income are also important. BLS has a useful monograph that includes a chart plotting productivity and real compensation (http://www.bls.gov/opub/mlr/2011/01/art3full.pdf). Real compensation began lagging productivity increases in the early 70s and the differential has grown steadily.

    This is important because this recession is marked by a breathtaking disconnect between burgeoning global supply and tepid domestic demand (people with no jobs or low paying jobs cannot afford to consume at the same level as fully employed people). Credit discounted far below its natural level has propped up demand somewhat but that party has to come to an end. What happens as credit pricing returns to historically normal levels?

    We have been borrowing against the future rather than addressing the structural problems created by moving millions of domestic jobs to low cost foreign venues. Those domestic workers don’t simply disappear, only their jobs disappear.

  3. Thanks for continuing to watch these numbers and break them down. From adjusted historical data to large shifts around election time, it is difficult to not view official numbers without a skeptical eye. I wish that were not the case.

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