Alternative Measures of Labor Underutilization

Unemployment statistics are among the most closely watched and most widely reported labor market numbers. While many people are familiar with the unemployment rate (discussed in more detail in this post), in recent years the “Alternative Measures of Labor Underutilization” published by the U.S. Bureau of Labor Statistics have grown in popularity as statistics for identifying slack in the labor market. These alternative measures, commonly identified by a “U” in front of a number from 1 to 6, provide both more narrowly (U-1 and U-2) and more broadly (U-4, U-5, and U-6) defined estimates of labor underutilization than the official unemployment rate (identified as U-3).

U-1
This tracks the number of persons unemployed 15 weeks or longer as a percent of the civilian labor force. By this measure, 1.2 percent of the Oregon labor force met this criterion in 2018.

U-2
This considers the percentage of job losers and persons who completed temporary jobs as a percentage of the civilian labor force.  By this measure, 2.0 percent of the Oregon labor force met this criteria in 2018.

U-3
This is what is known as the official unemployment rate. It is the total unemployed as a percentage of the civilian labor force. In 2018 in Oregon, the official unemployment rate was 4.1 percent.

U-4
This measures the total unemployed plus discouraged workers as a percentage of of the civilian labor force plus discouraged workers. Discouraged workers are defined as those who want a job, are available for work and have searched for work in the prior year; however they are not currently looking for a job for reasons related to the job-market. If these workers are added, the measure results in only a modest increase relative to the official rate. In 2018, the U-4 rate  was 4.3 percent.

U-5
This includes the total unemployed, plus discouraged workers plus all other marginally attached workers as a percentage of the civilian labor force plus all marginally attached workers. Marginally attached workers are defined as persons who are neither working nor currently looking for work but indicate that they want and are available for a job and have looked for a job sometime in the past year. This group includes those who are not currently looking for work for reasons such as lack of child care or transportation. Using this definition, 5.1 percent of the civilian labor force plus the marginally attached workers met these criteria in 2018.

U-6
This includes not only all unemployed and marginally attached persons, but also those employed part time for economic reasons. This latter group provides an objective measure of a portion of the underemployed (the so-called “involuntary part-time workers”). To be classified as employed part time for economic reasons, an individual must also be working part time because of poor business conditions or because of the inability to find full-time work and must want and be available for full-time work. Involuntary part-time employment does not capture all underemployed, such as those whose education may qualify them for a more highly skilled position. However, these types of underemployment are fairly subjective and more difficult to quantify. Using the broadest measure of labor underutilization tracked by the BLS, U-6, 8.3 percent of the civilian labor force plus the marginally attached was either unemployed, marginally attached to the labor force, or underemployed in 2018.

Read more about the alternative measures of labor underutilization here.