1. Measures of Labor Underutilization from the Current Population Survey
Steven E. Haugen
Office of Employment and Unemployment Statistics
Presented by: Lucy P. Eldridge
18th International Conference of Labour Statisticians
December 4, 2008
BLS
U.S. Bureau of Labor Statistics

2. Unemployment Key indicator of labor market performance
Objective definition
not working
available for work
have actively searched for work

3. Occasional Criticism of the Official Unemployment Concept
Too broadly defined
Too narrowly defined
Job search requirement too stringent
Should capture the underemployed
Should be a measure of hardship
Quality of jobs not captured

4. U.S. Unemployment Rate
Data collected in Current Population Survey (CPS) – monthly survey of approximately 60,000 households
Unemployed as a percent of the civilian labor force
CPS methods and concepts can be found at:

5. Background on Alternative Concepts
In 1976, under the direction of Commissioner Julius Shiskin, BLS developed a range of unemployment indicators (U-1 through U-7)
Motivation: no single measure can satisfy all analytical or ideological interests
Rates oriented from lowest to highest, implicitly associated with larger groups of people experiencing economic hardship

6. Background on Alternative Concepts
1994 Major redesign of the Current Population Survey (CPS) affected inputs in several of the U-1—U-7 measures
Publication discontinued in late 1993
In October 1995 BLS introduced U-1— U-6
Regular publication of the new set of indicators began in February 1996

7. Alternative Definitions of Unemployment
U-1 (most restrictive): only persons unemployed for at least 15 weeks
U-2: only persons unemployed as a result of job loss
U-3 (official measure): persons not employed, actively seeking work, and available to work

8. Alternative Definitions of Unemployment
U-4: unemployed plus discouraged workers - those who have given up the search for work because they feel no jobs are available
U-5: unemployed plus all marginally attached workers - those who have given up the search for work for any reason
U-6 (broadest measure): unemployed, marginally attached plus persons employed part time for economic reasons
U-4 and U-5 both add selected not-in-labor-force categories (that is, groups of persons neither employed nor unemployed) to the unemployed
U-4 adds in discouraged workers. (persons neither working nor currently looking for work who indicate that they want work, but have given up searching because they feel no jobs are available for them.- requires prior job search and current availability to work) rate is as a percent of civilian labor force plus discouraged workers
EXTRA INFO: The number of discouraged workers was much smaller after the 1994 redesign because the definition for the group was tightened to include only those with a recent job search. , prior desire to work and job market-related reason for not looking was sufficient
; considered too subjective. New 1994 questions cut # discouraged in 1/2
U-5 added all marginally attached workers
Marginally attached workers are those who want a job and are available to work now, and have looked for a job in the past year--but not in the past month--for a wide range of reasons that extend beyond discouragement over job prospects. (such as transportation problems or child care needs) rate as a percent of civilian labor force plus discouraged and other marginally attached
The uppermost indicator in the range, U-6, unemployed, discouraged workers, marginally attached for other reasons, as well as all persons employed part time for economic reasons - those who want and are available for full-time work but have had to settle for a part-time schedule.
. Including a group of employed persons is a large conceptual break from the other measures, but since many would agree that these persons are visibly underemployed, those who want to treat the underemployed on an equal basis with the unemployed may find this alternative measure useful.

9. Alternative measures of labor underutilization: U1-U6
(2007 annual average; in percent)
Source: U.S. Bureau of Labor Statistics, Current Population Survey

10. Cyclical Analysis
U-1— U-6 have followed a nearly identical track since 1994
In terms of cyclical analysis there appears to be little advantage to any one of the alternative measures

11. Alternative Measures of Labor Underutilization: U1-U6
(seasonally adjusted ; in percent)
Source: Bureau of Labor Statistics, Current Population Survey
Note: Data are monthly, shaded area denotes recession.

12. International Comparisons
BLS does not prepared international comparisons on the U-1 to U-6 basis
Discouraged workers are not defined for most countries according to the current U.S. definition
One exception is Japan, where a researcher was able to prepare comparable estimates of U-4 to U-6.

13. Conclusion
Alternative measures of unemployment can meet different needs
Cyclical trends among alternatives are very similar
The official unemployment rate still is viewed by many to be the most objective, best overall cyclical indicator of labor underutilization.

14. Contact Information
Steven E. Haugen
Office of Employment and Unemployment Statistics
Lucy P. Eldridge
Office of Productivity and Technology
BLS
U.S. Bureau of Labor Statistics

15. Alternative measures of labor underutilization: U1-U6
(in percent)
EXTRA INFO IF ASKED: Current 2008 data for October; difference between the U’s basically the same
Source: U.S. Bureau of Labor Statistics, Current Population Survey

16. LABOR FORCE AND UNEMPLOYMENT CONCEPT DIFFERENCES
U.S. Current
Population Survey
International Labor Office Guidelines
Labor Force
Civilians only
Total (incl. military
personnel)
Unpaid Family Workers in Labor Force
Excludes those working
fewer than 15 hours per
week
Includes all unpaid family
workers
Unemployment Status of
Persons on layoff
All with a recall date, or who
expect to be recalled within
6 months
Only those with a weak
attachment to their job (and
with no recall date)
Persons waiting to begin a new job
Must be searching for work
Do not have to be
searching for work