Underemployment Index ("U7") Improves in October

The U.S. unemployment rate ("U3") declined slightly to 9.0 percent -- not much comfort.

But if we add the percentage of the labor force that is underemployed -- the involuntarily employed part-time, i.e., those working "part-time for economic reasons" -- the combined index of underemployment fell by two-tenths of a percentage point, from 13.0 to 12.8 percent. Slightly better.

The underemployment index is unofficial. I am calling it U7. See the last line of the table at the end of this post.

The unofficial U7 index is useful because it gives a more complete picture of the extent of the lack of work in the labor market than the unemployment rate alone. It is easily interpreted as unemployment plus underemployment, as a percentage of the labor force. It can be compared on a monthly basis because both components and the denominator are seasonally adjusted.

Seasonal adjustment issues are created by the three numbers the Bureau of Labor Statistics uses now as its broad measures of unemployment -- U4, U5 and U6. They all combine seasonally adjusted numbers with unadjusted numbers. This means that monthly changes in these numbers may be misleading because of seasonal factors. Another consequence of combining seasonally adjusted with unadjusted numbers is that state data for U4, U5 and U6 are provided on a four-quarter moving average basis, which is pretty useless for regional economists and journalists trying to pick up state workforce developments on a timely basis.

Un- and Under-Employment Indicators (Aug, Sep, Oct)
Unemployed/labor force, Rate % (U3) 9.1 9.1 9.0
Labor Force (mil.) 153.6 154.0 154.2
Teenagers unemployed % 25.4 24.6 24.1
Blacks unemployed % 16.7 16.0 15.1
Long-term unemployed/unemployed % 42.9 44.6 42.4
Unemp+discouraged/LFplusdisc* % (U4) 9.7 9.7 9.6
Unemp+marg. att./LF plus marg. att.* % (U5) 10.6 10.5 10.5
Unemp plus invol PT/LF % (proposed U7) 12.9 13.0 12.8

The official broad unemployment and underemployment rates (U4, U5, U6) are discussed at a href="http://www.bls.gov/fls/flscomparelf/unemployment.htm#table1_2"; they combine seasonally adjusted and non-seasonally adjusted numbers in the numerator and the denominator. U7 is a proposed indicator that combines two seasonally adjusted numbers and divides them by another seasonally adjusted number, avoiding seasonal-adjustment issues and permitting (where sample size allows) month-to-month comparisons.

*Starred indicators are not seasonally adjusted and therefore should not be combined with (non-starred) seasonally adjusted data. Marginally attached includes discouraged workers. Denominator for all indicators except the long-term unemployed is the labor force. Seasonal adjustments are by the BLS.

 

Comments

[Roy Rudy]

10:25 PM on 11/04/2011

62% of eligible workers are seeking employment to upgrade, permanent interests, or substantially improve wages. 62% of eligible workers are seeking jobs and that also contains the reported 9.1% unemployed. The numbers are staggering. Time and application will resolve the temporary discourse of American industries in recess that may take another 2.5 to 3.0 years before substantial economic regains in the employment and industry recuperation, turns the recessive period around. The bright picture is that nothing will be exactly like the past as many workers will find themselves employed with renewed endeavors that instills interests in improved industries and their new jobs.

[John Tepper Marlin]

04:47 PM on 11/11/2011

Roy - That is an excellent point - the decline in the U.S. standard of living means people are dissatisfied with their jobs. The good news is that more people are being employed in the rest of the world. The bad news is we are competing with a lot more people. The United States is going to have to adapt, become more entrepreneurial. Entrepreneurship can and should be taught. Adapting is going to take more investment by the private sector and government. Your take is that it is all going to happen and I don't disagree, but it is taking a long time!

[Roy Rudy]

01:10 AM on 11/13/2011

A few new businesses have opened, while a more favorable atmosphere for new businesses in their start-ups is still 2 to 3 years from now.