Friday, March 5, 2010

The U6 unemployment rate and the US labor market

So the unemployment figures for February stayed constant ( - see http://www.bls.gov/news.release/empsit.nr0.htm), confounding those economists who had expected the rate to rise because of the winter storms up the east coast.  So that's the good news - despite the bad weather unemployment rates haven't risen.

But there was some bad news - 36,000 jobs were still lost across the nation last month and the unemployment rate hides the fact that there are now a lot of "discouraged workers" out there - people who have dropped out of the labor force because they aren't looking for a job anymore - yes, they're the people who have given up hope.  And it's hardly surprising they've given up hope when you look at the duration statistics - 6.1 million of the unemployed have now been out of work for more than 6 months. 

The Bureau of Labor statistics defines these discouraged workers as "marginally attached" - and actually produces statistics for these workers - they are estimates of course - but they really don't look good right now - an indication of how bad things are out there in the US labor market.  The trends in the "marginally attached" workers were described as follows:

"Among the marginally attached, there were 1.2 million discouraged workers in February, up by 473,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.3 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities."

So what is missing from the mainstream media reports is that if you roll these workers into the statistics, it really doesn't look quite so pretty.  I decided to take the data and plot it myself from the stats that the BLS issues itself, and this is what it looks like...it is the unemployed plus discouraged workers plus marginally attached plus part-time workers for economic reasons (the underemployed) as a percentage of the civilian labor force plus marginally attached.

This is the U6 rate, and it's movement mirrors the unemployment rate for the most part, rising rapidly throughout 2009, but interestingly the drop going into 2010 seems to have ticked up again in February with the rate moving from 16.5% to 16.8% with most of this upward move due to discouraged workers jumping from 1.06 million to 1.2 million, and the number who are underemployed jumping from 8.3 to nearly 8.8 million.

What bodes well is that at least some of these underemployed workers still have jobs, otherwise the unemployment rate could be a lot worse: but on the other hand some of them could have been in full time jobs that were converted into part-time jobs which wouldn't be good. But what is definitely not good is the increase in discouraged workers - these workers have given up looking for the moment - and if the labor market begins to improve these workers could come back into the market very quickly making the recovery in the jobs market look slower. 

1 comment:

  1. I think this is a better measur of unemployment than what we have right now. Why don't more people look at this measure?

    ReplyDelete

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