What Is the U-6 (Unemployment) Rate?
The U-6 (Unemployment) rate measures the percentage of the U.S. labor force that is unemployed, plus those who are underemployed, marginally attached to the workforce, and have given up looking for work. The U-6 rate is considered by many economists to be the most revealing measure of the true state of the nation's employment situation.
Nevertheless, the more widely-reported unemployment number is the U-3, often referred to simply as the unemployment report. The U3 reveals only the number of people who are out of work and have sought work in the past four weeks.
Both numbers are published by the Bureau of Labor Statistics (BLS).
- The U-6 (Unemployment) rate is sometimes called the "real" unemployment rate.
- The widely-reported official unemployment rate, the U-3, counts only people who are currently unemployed and have looked for work in the past four weeks.
- The U-6 includes not only the unemployed but the underemployed, the "discouraged" workers who have given up looking for work, and the "marginally attached" who have left the workforce but may return at some point.
- The U-6 is considered by many economists to be the most revealing measure of a country’s employment situation.
- Both the U-3 rate and U-6 rate are published by the BLS in the monthly job report, which is used by market watchers to gauge the health of the economy.
Understanding the U-6 (Unemployment) Rate
The official unemployment rate used by the U.S. government and published by the Bureau of Labor Statistics (BLS) is the U-3 rate. This is the percentage of the total labor force that is unemployed and has actively sought employment within the past four weeks.
The portion of the unemployed that has not looked for a job in the past four weeks is defined as "marginally attached" and no longer counted as unemployed.
That marginally attached group includes unemployed people who have unsuccessfully looked for work sometime in the past twelve months. It also includes people who have returned to school or become disabled, in which case they may or may not return to the labor force at some point.
Composition of the U-6 Rate
The U-6 rate, on the other hand, factors in this marginally attached percentage of the labor force in its unemployment calculation.
The U-6 rate also includes the underemployed in its metrics. These are people who want full-time jobs but have settled for part-time jobs due to economic conditions. While the U-3 rate considers this category of workers to be employed, the U-6 counts this group as unemployed.
Finally, the U-6 rate includes the "discouraged": Those who want a job but have given up looking.
The BLS publishes six monthly unemployment numbers. The U-3 is the official rate and is most widely quoted. The U-6 is a more comprehensive look at the state of American workers.
Factors of the U-6 (Unemployment) Rate
Gallup, the data analytics firm, considers the U-6 rate to be "the real unemployment rate," and maintains that the widely-quoted U-3 rate does not accurately represent the reality of joblessness in America.
Gallup notes that an engineer or any other skilled professional who takes a low-paying part-time job to survive would not be counted in the official unemployment rate, even if he or she makes as little as $20 a week.
In addition, the U-3 rate does not include any workers who are employed but have had their work hours reduced.
All of the above are termed "underemployed," and are included in the U-6 rate.
The U-3 also omits those who are unemployed but have not looked for work in the past four weeks. These are the "discouraged" workers that the U-6 reflects.
Tracking the U-6
The St. Louis Fed (FRED) tracks the U-6 rate over time on its website.
Its chart, based on BLS numbers, shows a startling U-6 rate of 22.9% in April 2020, during the first national COVID-19 shutdown. The official U-3 rate at that time was 14.7%. In January 2020, it had been just 6.9%. The official U-3 rate was 3.5%.
Example of the U-6 (Unemployment) Rate
To calculate the official unemployment rate, the U-3, the BLS divides the total number of unemployed people by the total number of labor force participants, then multiplies that number by 100.
For example, the June 2019 monthly rate report indicated that the total number of people that were unemployed was 6.5 million and the civilian labor force consisted of 163.9 million people. The U-3 unemployment rate was 4%.
In the same January 2022 report, the number of people that were marginally attached to the labor force totaled 1.5 million, while the total number of workers with part-time jobs for economic reasons was 3.7 million. The U-6 unemployment rate was 7.1%.
When calculating the U-6 rate, the marginally attached group is added to both the numerator (total unemployed) and denominator (total labor force). In addition, part-time workers are added to the numerator only, since they have already been included as part of the labor force.
The U-6 rate is considerably higher than the U-3 figure and is arguably a better reflection of the health of the American workforce at the time.
The unemployment rates are not based on the numbers of people who have applied for unemployment. They are based on a survey of households in every region of the U.S.
The COVID-19 Effect
Since March 2020, the Bureau of Labor Statistics has added several questions to its Household Survey in order to measure the impact of the coronavirus pandemic on jobs.
Here's some of what it found in January 2022:
- 15.4% of Americans with jobs teleworked at least part of the time.
- 6 million people were unable to work because their employer closed or lost business due to the pandemic.
- 1.8 million were unable to look for work due to the pandemic.
How Is the U-6 (Unemployment) Rate Calculated?
The unemployment statistics released early each month by the Bureau of Labor Statistics are based on a survey of 60,000 households. That's a total of about 110,000 individuals in about 2,000 geographic areas, urban and rural. The survey is conducted by Census Bureau employees.
The calculation is straightforward:
- The number of people who say they are unemployed but have looked for work in the past month, as a percentage of the total civilian working population, equals the "official" or U-3 unemployment rate.
- The number of people who are unemployed, under-employed, are unemployed but have given up looking for work, or have temporarily left the workforce, as a percentage of the total civilian working population, equals the "real" or U-6 rate.
Where Can I Find the U-6 (Unemployment) Rate by State?
What Are the 6 Unemployment Rates?
The U-1 unemployment rate is only one of six "alternative measures" of labor utilization in the U.S. that are published monthly by the Bureau of Labor Statistics.
The alternative measures include:
- U-1: The percentage of the civilian labor force that has been unemployed for 15 weeks or longer.
- U-2: The percentage of the civilian labor force that lost jobs or completed temporary jobs.
- U-3: The percentage of the civilian labor force that is unemployed and has sought work in the past four weeks.
- U-4: The number of unemployed plus the number of discouraged job-seekers as a percentage of the total labor force.
- U-5: The total of the unemployed plus discouraged job-seekers plus marginally attached workers, as a percentage of the total labor force.
- U-6: All of the people counted in U-5 plus those working part-time due to economic conditions, as a percentage of the total labor force.
The Bottom Line
The U-3 unemployment rate is reported monthly and is watched and tracked carefully as a key indicator of the health of the U.S. economy.
The U-6 rate offers a broader understanding of the true health of the economy.
How many people are scrambling for part-time jobs because they can't get a full-time position? How many people have given up even trying to get a job? How many have left the workforce, hoping to return when the situation improves?
The U-3 number does not include any of those people, but the U-6 rate does.