The Real Unemployment Rate?

For many months now I've been wondering why so many people call the Labor Department's U-6 measure of labor underutilization the real unemployment rate, as if, somehow, people settling for part-time work are without a job at all.
Sure, they may want to be employed full-time, but you don't always get what you want, particularly during times like these. Saying that the unemployment rate was really 16.4 percent in May and not 10.6 percent (which is probably a far better measure than the "official" U-3 rate of 9.4 percent) strikes me as being just plain wrong.

Comments

[Vic Napier]

I would not argue (much) with you. However, consider the unemployment issue from the perspective of business rather unemployed individuals. From that point of view, we can see that a huge resource of human talent is available, but unused. The traditional solution is to wait for business to produce more jobs, but that may not be a reasonable expectation this time around. It will take years for the creation of enough decently paying full time jobs to utilize this resource. By that time, the social impact will be devastating.

Maybe we need to examine other solutions, both as economic and social policy as well as prescriptions for individual action. Entrepreneurship is the standard alternative answer, but I think things will have changed so much by the time recovery comes that old-fashioned entrepreneurism will not enough. We need to think about encouraging micro business, better ways to organize small business and self-employment, and reconsider internet opportunities.

From this perspective both the U-5 and U-6 numbers become more meaningful. Arguing over which is more meaningful is a waste of energy. We should look at how many people are available for work and help them create the work the need. That will create more economic opportunity, (“jobs” may be an archaic concept in the coming economy), and lead to sustainable recovery more reliably than an ever increasing “deficit stimulis”.

Vifc Napier

2009 Jun 08 03:18 PM

[Dave Wrixon]

It is all semantics. If you are not active in the wealth generating sectors of the economy, then you are just along for the ride. You might as well be on social benefits. Unfortunately, that applies to a historically much higher percentage of the population than at any time in US history, or indeed in most place of the globe.

2009 Jun 08 03:59 PM

[Highonlife]

"Sure, they may want to be employed full-time, but you don't always get what you want, particularly during times like these."

By that theory, the unemployment rate is 0%. How easy is it to rewrite that above statement as :

"Sure, they may want to be employed, but you don't always get what you want, particularly during times like these."

2009 Jun 08 04:22 PM

[dybydx]

the U-1 to U-6 figures are exactly what they meant and users should use it at their own risk.

from a benefit payout officer's perspective, U-3 probably make sense the most. since that is most relevant indicator of how much money will be paid out as unemployment benefits.

from an economist's perspective, U-6 make the most sense because this tells us how far the labor market is below its maximum capacity.

2009 Jun 08 11:22 PM

[vodka_tonic]

try living on part time wages, not much of a living !

2009 Jun 09 01:01 AM

[Fighting Yoda]

U-1 to U-6 are all separate measurements well defined. You need to interpret them and use each of them suitably. Yes U-6 is a broad measure of unemployment and underemployment - very important indicators of economic health.

Underemployment has to decrease first before full employment begins. Part time increases first before part timers get full employment - all important indicators.

2009 Jun 09 01:46 AM

[zagrebzagreb]

For an employee that was full-time, moving to part-time hardly counts as gainfully employed: no healthcare, likely 50% or less income, drastic reductions in dispossable income (if any)...

And how about the professional, for whom there is no 'part-time' in his or her line of work? Part-time means working as a waiter, landscaping, stocking wharehouses...

In other words, part-time is a MUCH different than full-time in most every case... The distinction deserves to made if you want to understand the effects.

2009 Jun 09 01:15 PM