UNEMPLOYMENT | Rising Long-Term Unemployed in July

The official unemployment number (U-3) of 10.2 percent in July is down 0.9 of a percentage point from June.

But the  number of long-term unemployed (U-1) is growing as Covid-19 extends into another month, from 2.1 percent in June to 5.0 percent in July. These are likely to be people with fewer skills or opportunities, who are less able to adapt to a new economic situation. This damage to the labor market is hard to repair. 

The broadest published measure of unemployment (U-6) in July is still 16.5 percent, nearly double what it was in March.

Table A-15. Alternative measures of labor utilization
HOUSEHOLD DATA (https://www.bls.gov/news.release/empsit.t15.htm)
Measure	Seasonally adjusted, percent
	July 2019	Mar. 2020	Apr. 2020	May 2020	June 2020	July 2020
U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force	1.3	1.2	1.1	1.4	2.1	5.0
U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force	1.7	2.4	13.2	11.6	8.9	8.1
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)	3.7	4.4	14.7	13.3	11.1	10.2
U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers	3.9	4.7	15.1	13.6	11.5	10.6
U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force	4.5	5.2	16.0	14.6	12.5	11.3
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force	6.9	8.7	22.8	21.2	18.0	16.5

Underemployment Improves Slightly in October - Proposed New Measure U7 Falls from 13.0% to 12.8%

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 measure of unemployment fell by two-tenths of a percentage point, from 13.0 to 12.8 percent. This is an unofficial but useful number that we might call U7. See the last line of the following table.

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
Unemployed (mil.)	14.0	14.0	14.0
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
Unemployed+discouraged/LF+disc* % (U4)	9.7	9.7	9.6
Unemployed + marg. att./labor force+marg. att.* % (U5)	10.6	10.5	10.5
Unemployed + involuntarily PT/LF % (proposed U7)	12.9	13.0	12.8

*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. Source: Department of Labor, Bureau of Labor Statistics, www.bls.gov/news.release/pdf/empsit.pdf, November 4, 2011. The official broad unemployment and underemployment rates (U4, U5, U6) are discussed at 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, avoidjing the seasonal adjustment issue and permitting month-to-month comparisons.

It is a mystery to me why the BLS uses as its only broad measures of unemployment three numbers (U4, U5, U6) that combine seasonally adjusted numbers with unadjusted numbers. This means that monthly changes in these numbers may be misleading because of seasonal factors. The proposed U7 measure does not suffer from this problem and is easily interpreted.

A consequence of combining seasonally adjusted with unadjusted numbers is that state data are provided only on a four-quarter moving average, which is pretty useless for picking up state underemployment trends on a timely basis. 

The U7 indicator (unemployment + underemployment) can be compared on a monthly basis because both components (and the labor force denominator) are seasonally adjusted.