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More on Unemployment Rates

Friday, March 07, 2008 | 05:00 AM

Over the past few days, we've been discussing job creation and the various ways to think about unemployment. This has been a long standing theme around here (Augmented unemployment rate, as well as the NILF issue -- Not In Labor Force).

See the list at bottom of BLS Alternative Measures of Labor Underutilization.

Since a picture is worth a 1,000 words, I'd like to point to some recent work by Prof Andrew A. Samwick of Dartmouth. Over at Vox, Baby, the good professor posted a terrific chart showing these different measures of unemployment:

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U3 Unemployment Trends (%), plus U4, U5 , U6

Source: Andrew Samwick

I see two significant factors about these collectively measures of Unemployment:

First, the official (U3) measure, so favored by politicians, understates "real world" unemployment by about a third.

Second, and perhaps most important, since late 2006/early 2007, unemployment levels have bottomed and are now trending higher. And, we appear to be in the early parts of that cycle . . .

Sources:
What the Unemployment Rate Misses
Andrew A. Samwick
Vox, Baby March 05, 2008
http://voxbaby.blogspot.com/2008/03/what-unemployment-rate-misses.html

Table A-12: Alternative measures of labor underutilization
BLS
http://www.bls.gov/news.release/empsit.t12.htm

BLS Alternative Measures of Labor Underutilization
U1    Persons unemployed 15 weeks or longer, as a percent of the civilian labor force
U2    Job losers and persons who completed temporary jobs, as a percent of the civilian labor force
U3    Total unemployed, as a percent of the civilian labor force (the official unemployment rate)
U4    Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers
U5 Total unemployed, plus discouraged workers, plus all other marginally attached workers as a percent of the civilian labor force plus all marginally attached workers
U6    Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers (the "real world" unemployment rate)