U-6

1) The Bureau of Labor Statistics (BLS) publishes 6 different measures of unemployment, namely U1 to U6.

2) The one which you hear all over the news is also referred to as the U-3 unemployment rate. It is defined as a percentage with the following calculations

Numerator = the total number of workers who are without a job and are actively searching for one

Denominator = the total labor force 3) The rest are broader measures of unemployment with the formula being additions to the numerator of the U-3 while keeping the denominator constant (the total labor force).

4) U-4 numerator = U-3 + number of workers who have stopped looking for work as they feel discouraged by prevailing economic conditions and job prospects

5) U-5 numerator = U-4 + number of workers who are able to work but have not looked actively for work

6) U-6 numerator = U-5 + number of workers who are engaged in part time jobs and want to transition into full time but cannot because of external factors. Hence, the U-6 is the broadest metric of unemployment published.

7) One of the current economic issues is the prevalence of a low unemployment rate and a low inflation rate.

One of the responses to this by economists is to not only look at the U-3 rate (3.9% for April) but also to look at the U-6 rate (7.8%).

However the U-6 rate has also been steadily falling.

Citibank US equity chief strategist Tobias Levkovich says "When you look at the gap between U6 and U3 unemployment rates, it tends to be a really good measure for what happens to wage inflation"

Source: St Louis Fred