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Unemployment: Is There Just One Number to Watch?


Wednesday, June 20, 2018

By Doreen Fagan, Public Affairs Staff

You’ve seen the headlines—on June 1, the Bureau of Labor Statistics (BLS) reported that the nation’s unemployment rate was sitting at 3.8 percent, an 18-year low.

To see a lower rate, you’d have to dust off your jetpack and head back to December 1969. (That year, Neil Armstrong set foot on the moon and the Beatles gave their last public performance. So, why not?)

If you prefer your feet firmly planted, check out this FRED® chart, which plots the unemployment rate using data sourced from the BLS.

FRED® (Federal Reserve Economic Data) is the St. Louis Fed’s signature economic database. It houses a half-million data series and is free for use worldwide.

What does this picture tell us, exactly? And is this the only measure of unemployment that economists watch?

One Small Step: Defining Unemployment

Let’s explain what economists mean when they talk about unemployment. The BLS, which is the federal agency charged with measuring labor market activity, offers these basic concepts:

  • The unemployed are people who are jobless, actively seeking work and available to take a job.
  • The nation’s official unemployment rate, shown in the chart above, is the number of unemployed as a percentage of the labor force.
  • The labor force is the sum of employed and unemployed people, age 16 and over.

But, what about a couple neighbors you know?

  • Bob, who was let go from his construction job and tried for months to find new employment but is now halting his job search due to poor local prospects.
  • Karen, who’s working part time as a tutor because her full-time job as a systems analyst was eliminated.

Based on BLS’ official measures, neither of your neighbors would be counted among the nation’s unemployed. Such nuances are why economists also study alternative measures of unemployment. The BLS tracks these numbers, too, to help gauge the economy’s use of its labor resources.

Different Measures of Labor Underutilization

Measure What It Looks at Seasonally Adjusted Rates (As of May 2018)
U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force 1.3%
U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force 1.8%
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate) 3.8%
U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers 4.0%
U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force 4.6%
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force 7.6%
Federal Reserve Bank of St. Louis

NOTES: Seasonally adjusted rates are as of May 2018. 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. 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.
SOURCE: Alternative measures of labor underutilization, Bureau of Labor Statistics.

In the above examples:

  • Bob is a discouraged worker (counted in U-4 through U-6).
  • Karen is employed part time for economic reasons (counted in U-6).

You’ll find more specifics on how the government measures unemployment and different measures of labor underutilization on the BLS website.

Ready for a Bigger Leap?

You can explore a ton of unemployment data on the St. Louis Fed’s Research site. A quick search of “unemployment rate” in FRED yields more than 14,000 data series. You can view trends by unemployment classification, geography, age, education, gender and more.

And, if you really want to head back to 1969, check out FRASER® (Federal Reserve Archival System for Economic Research). This digital library of U.S. historical materials features several archived documents on unemployment—including the BLS’ original bulletin on employment and earnings (PDF) from December 1969.


Additional Resources

ABOUT THE AUTHOR
Doreen Fagan 

Doreen Fagan is a senior content editor with St. Louis Fed Public Affairs.

Tagged doreen faganunemploymentjobslabor forceecon lowdownforecasting
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