Alternative Unemployment Stats Paint Different Economy

Story by Michael Bielawski, from the BenNetwork.com

According to the US Bureau of Labor Statistics U-3 measure of unemployment, the Northeast economy is doing relatively well with jobless rates ranging from 4.3 percent in Vermont and New Hampshire to 7.7 for Rhode Island. However U-3 is just one of six BLS criteria for calculating unemployment, another is U-6 which makes that range become 8.8 percent for Vermont to 13.5 percent for Rhode Island.

“U-3 is the traditional one and the one that’s maybe better suited for the past economy that it is for today,” said University of Massachusetts Economics Professor Gerald Friedman. “Now it might not have been that bad in 1955, but it’s definitely inadequate today. The difference is U-3 counts people who are actively looking for work, but not finding it, divided by the total labor force.”

U-3 does not include people working part-time (under 35 hours a week) who want full-time or people who are discouraged (haven’t applied somewhere within four weeks of the BLS survey) and have given up.

“What you see is the U-3 measure actually falling in times when the U-6 measure is staying high or even rising, because when people give up looking for work they drop out of the U-3,” said Friedman. “Or if they give up looking for full-time work but settle working part-time, then they drop out of U-3. They are employed as far as U-3 is concerned, but they still show up as underemployed in U-6.”

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