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1 1 (November 06, 2020)

handle is hein.crs/govdclg0001 and id is 1 raw text is: \ Q xa S Introduction to U.S. Economy: Unemployment The U.S. economy has seenhistoric ally high levels of unemployment as a result of the Coronavirus Disease 2019 (COVID-19) pandemic. This In Focus provides an introductionto the official unemployment rate and alternative measures of unemployment, briefly examines the reasons for unemployment, and places the unemploymentrate in a broader economic context. The Bureau of Labor Statistics (BLS) releases the official unemployment rate, commonly known as the U3 series, on a monthly basis. The U3 rate measures the number of unemployed individuals as a percentage of the entire labor force. Unemployment Rate Number of Unemployed Individuals Number of Individuals in Labor Force (Employed + Unemployed Individuals) The labor force is all employed and unemployed individuals aged 16 and older, excluding active duty military personnel or the institutionalized. Individuals are considered employed if they did any work for pay or profit in the previous week. Individuals are considered unemployed if they do nothave ajob, have actively looked for workin the previous four weeks, and are currently available to work. If an individualdoes not have ajob, but has either not looked for work in the previous four weeks or is not currently available for work or both, that individualis not considered part of the labor force. Figure 1 displays the official unemployment rate (U3) since 2010, which increased as a result of COVID-19. Figure I. Unemployment Rate Source: Bureau of Labor Statistics (BLS). This formulation of the unemployment rate can cause confusion because the size ofthe labor force, employment, and unemploymentcan all change s imultaneously. For example, if the number of individuals joining the labor force outnumbers those who found work, then the unemployment rate would increase despite the increasein employment. This can happen as the economy recovers from a recession and individuals who hadpreviously given up looking for workrejoin the labor force by restarting their job search. Aitern atw $ Meas res~ c Un empoyment BLS reports other measures ofunemployment-called measures o flaborunderutilization -that include additional underemployed groups. These measures can provide a broader sense of labor market conditions. The most prominent alternative measure is theU6 unemploymentrate, also shownin Figure 1. Alternative measures of labor underutilization include (1) the Ul rate-individuals unemployed for 15 weeks or longer; (2) the U2 rate-individuals who lost jobs or completed temporary jobs; (3) the U4 rate-the U3 rate plus discouraged workers (individuals who give ajob- market-related reas on for not currently looking for work); (4) the U5 rate-the U4rate plus marginally attached workers (individuals who are available to work, have expres sed a desire to work, and have looked for workin the past 12months); and (5) the U6rate-the U5 rate plus individuals working part time for economic reasons. These alternative measures are particularly useful during recessions in pinpointing the effects on the labor market. Figure 2 compares each measure of underutilization in January, May, and October 2020. Similar to the U3 rate, the U4, U5, and U6 rates remain roughly doubled in October from January. However, earlier in the pandemic, the U6 rate increased 14percentage points as compared with the roughly 10 percentage-point increase fromthe U3, U4, and U5 rates. This indicates that thenumber of individuals working part-time for economic reasons has been a more volatile category than other measures ofunderutilization. Figure 2. Comparison of Unemployment Rates January, May, and October 2020 Source: BLS. The average U3 rate in the United States varies significantly across groups depending on educational attainment andrace or ethnicity, as shown in Figure 3. Reces sions, such as the one causedby COVID-19, can cause disproportionate effects among groups as well. Updated November 6,2020

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