Professor Explains Unemployment and Labor Utilization Difference

March 22, 2016|

The word unemployed changed to employed on torn paperSimon Medcalfe, associate professor of finance in the James Hull College of Business at Augusta University, said that he is frequently asked if the unemployment rate is the true unemployment rate. He said that the current official U.S. unemployment rate for February is 4.9 percent. To arrive at this figure the Bureau of Labor Statistics surveys 60,000 households every month. A person, 16 years of age or over, is classified as unemployed if they meet all the following criteria: they had no employment during the reference week, they were available for work at that time and they made specific efforts to find employment sometime during the four-week period ending with the reference week.

The unemployment rate is then calculated as the number of unemployed divided by the sum of unemployed and employed persons.

The BLS does calculate a different measure of labor utilization (called U6). This rate takes into account those persons working part time but who would want and are available for full-time employment.

It also includes persons marginally attached to the workforce. Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.

Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work.

The current U6 measure of labor utilization is 10.1 percent (9.7 percent seasonally adjusted). The U6 measure is about one percentage point higher than the last time the official rate dropped below 5 percent. There are currently 73,000 discouraged workers in Georgia and over 180,000 employed involuntary part-time.

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