U 6Edit
U-6, the broader measure of labor underutilization in the United States, is published by the Bureau of Labor Statistics as part of its monthly assessment of the job market. Unlike the standard unemployment rate you may see in headlines, U-6 adds nuance by counting not only the officially unemployed but also workers who want full-time work but are working only part-time for economic reasons, as well as those who have looked for work in the past year but have not actively searched in the recent period. In practical terms, U-6 tends to run higher than the headline unemployment rate, especially during downturns, because it captures a wider set of people who are not fully employed or not fully engaged in the labor market.
In discussions of economic policy, U-6 is often cited as a more complete gauge of labor market slack and potential wage pressure. Policymakers and economists use it to judge whether the economy has enough vigor to sustain full-time employment gains for a broad swath of workers, or whether there is hidden slack that could translate into slower wage growth or weaker consumer demand. Critics of relying on U-6 point to its broader scope as a reason it can seem more pessimistic than the headline rate, arguing that it includes individuals who are not currently seeking work with the same urgency as the unemployed. Supporters respond that the extra scope helps avoid overstating gains when many workers are underemployed or discouraged, and that this is a more realistic read on whether the economy is really running at full capacity.
Definition and scope
- The U-6 rate covers several groups beyond the officially unemployed: those who want and are available for work but are not currently employed (the unemployed), those who have looked for work in the past year but have not looked in the last month (often described as marginally attached workers), and those who work part-time for economic reasons but would prefer full-time work.
- It is published as part of the BLS’s broader set of measures of labor underutilization, alongside other related indicators that researchers and policymakers monitor. See Underutilization (labor market) for related context.
- The denominator for U-6 includes the civilian labor force plus marginally attached workers, which keeps the metric aligned with the pool of people who could participate in work if conditions improved.
- For contrast, the standard unemployment rate (often called the U-3 rate) counts only those who are actively seeking work and are currently unemployed, excluding marginally attached workers and those working part-time for economic reasons. See U-3 for the related benchmark.
Historically, the U-6 metric and its peer measures originated as part of a broader effort to reflect the true slack in the labor market. The Bureau of Labor Statistics has long tracked a family of related indicators, sometimes referred to collectively as the “alternative measures of labor underutilization,” to supplement the conventional unemployment figure. These measures gained particular prominence during periods of economic stress, when underemployment and discouragement can mask or exaggerate the health of the job market depending on which statistic is emphasized. See labor market indicators for a wider framework.
History and development
- The U-6 measure has been part of the BLS toolkit for several decades, with its formal role in reporting becoming more prominent in the 1990s as analysts sought a fuller picture of labor conditions beyond the headline unemployment rate. See Bureau of Labor Statistics for the agency responsible.
- In recent business cycles, U-6 rose more quickly and remained higher than the headline rate during recessions, then narrowed as the labor market recovered. This pattern has fed debates about policy timing and the appropriate pace of stimulus, deregulation, or other reforms designed to spur hiring.
- Major economic episodes that have sharpened attention to U-6 include the Great Recession of 2007–2009 and the COVID-19 recession beginning in 2020, during which underemployment and discouraged labor-force participation were central themes in policy discussions. See Great Recession and COVID-19 recession for broader historical context.
Measurement and interpretation
- U-6 is designed to offer a broader view of labor market slack than the headline unemployment rate. Proponents argue that it better reflects the pool of workers who are not fully productive in the economy and who could contribute more fully if job conditions improved.
- Critics contend that the measure is more complex and thus harder to interpret at a glance, which can lead to misperceptions about the strength of the job market. The counterargument is that a simple figure can obscure meaningful differences in the quality and duration of work, which is precisely what U-6 attempts to illuminate.
- The balance between a simple headline figure and a more nuanced indicator is a recurring theme in policy debates. Advocates of a higher emphasis on U-6 stress that decisions about tax policy, regulation, and workforce development should account for underemployment, part-time-for-economic-reasons dynamics, and discouraged workers. Opponents of placing too much weight on U-6 caution against overreacting to broader swings that may reflect temporary factors rather than lasting trends.
- In practice, analysts look at U-6 alongside U-3 and other labor-market data (such as labor-force participation, job openings, and wage growth) to form a fuller picture of economic health. See unemployment rate and labor-force participation rate for related measures.
Policy implications and debates
- From a policy standpoint, U-6 provides a signal about how far the economy is from utilizing its full productive capacity. A higher U-6 relative to U-3 suggests that there is slack in the labor market that could be addressed through supportive policies, such as targeted training, apprenticeships, or incentives for employers to hire and retain workers in roles that match their skills.
- Proponents of pro-growth, supply-side policies argue that reducing regulatory burdens, cutting unnecessary taxes, and expanding investment in education and training can lift employment opportunities for a broad range of workers, including those who are underemployed. They contend that improvements in productivity and wages will be more durable if the economy creates more full-time, well-compensated positions rather than simply allowing part-time work to fill gaps.
- Critics who favor more expansive welfare or active labor-market programs sometimes use U-6 as a justification for larger safety-net provisions or for extending unemployment benefits during slowdowns. Advocates of a more conservative approach argue that misallocating resources toward subsidies can slow economic dynamism and reduce incentives to seek or accept full-time work. They emphasize that macroeconomic stability and robust growth are the best cures for underutilization, and that policies should prioritize durable job creation over short-run subsidies.
- In public discourse, the use of U-6 in policy discussions is sometimes framed around the tension between signaling labor-market strength and acknowledging pockets of underutilization. Supporters stress that addressing hidden slack helps protect against wage erosion and underinvestment in human capital, while skeptics warn against overstating difficulties if the broader economic fundamentals are sound. See economic policy for the broader framework in which these debates occur.