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1 1 (July 27, 2016)

handle is hein.crs/govebxn0001 and id is 1 raw text is: Inr. r g the lril iedbaesn.11 0 July 27, 2016 Introduction to U.S. Economy: Unemployment How is the Unemployment Rate Calculated? The official unemployment rate, also known as U3, released on a monthly basis by the Bureau of Labor Statistics (BLS), measures the number of unemployed individuals as a percentage of the entire labor force. It is important to define these terms, as the BLS definitions are not entirely intuitive. Unemployment Rate Number of Unemployed Individuals Number of Individuals in Labor Force (Employed + Unemployed Individuals) The labor force is defined as all individuals aged 16 and over who are either unemployed or employed, excluding active duty military personnel. Individuals are considered employed if they did any work for pay or profit in the previous week. Individuals are considered unemployed if they satisfy the following three criteria: (1) they do not have a job, (2) they have actively looked for work in the previous four weeks, and (3) and they are currently available to work. If an individual does not have a job, but has not looked for work in the previous four weeks, or are not currently available for work, that individual is not considered part of the labor force. Figure 1 displays the U3, which has been equal to or below 5% since October 2015. Figure I. Unemployment Rate 20% 16% 14% 12% 10% 8% 4% Un mpoyment Rate U3 0% o~ Lno s ,o -iNr tL 0 0 0 0 O0 N 0 0 0 CD 0 0 NNNNNNN N N N N N 0 Source: BLS. This formulation of the unemployment rate can cause confusion because the size of the labor force, employment, and unemployment can all change simultaneously. For example, the jobs report for June 2016 found that employment increased by 287,000 jobs, yet the unemployment rate also increased by 0.2 percentage points. This can occur if the number of individuals joining the labor force outnumbers those who found work, and often happens temporarily as the economy recovers from a recession. As employment prospects improve, many individuals who had previously given up looking for work rejoin the labor force by restarting their job search. Alternative Measures of Unemployment BLS reports other measures of unemployment-officially called measures of labor underutilization-that include additional groups with different employment statuses in the calculation. These rates can provide a broader sense of labor market conditions. The most prominent alternative measure is the U6 unemployment rate. The U6 unemployment rate measures the number of unemployed, as defined under U3, but also includes the number of marginally attached workers and individuals working part time for economic reasons as a percentage of an expanded labor force. Marginally attached workers include individuals who are available for work, have expressed a desire to work, and have looked for work in the past 12 months. The expanded labor force under U6 includes all individuals employed, unemployed, and marginally attached to the labor force. Figure 1 displays the U6 unemployment rate over time, which dropped below 10% beginning in October 2015. The U6 unemployment rate may provide a better sense of labor market conditions, especially since the last recession. Many individuals dropped out of the labor force as a result of the recession and the subsequent poor labor market prospects. This caused the difference between the U6 and U3 rates to grow higher than pre-recession rates, and the elevated gap still persists six years after the recession, as shown in Figure 2. Figure 2. Unemployment Measure Divergence 8% U6-U3 Gap 7% 6% 5% 4% 3/ 2% 1% 0% o Co 0 0 0 0 0 0 0 0 0 0 0 0 N N N N. N N N N N N N N N N Source: CRS calculations based on data from BLS. Unemployment Across Demographics The average unemployment rate in the United States varies significantly across groups depending on educational attainment and race or ethnicity. See Figure 3. https://crsreports.congressgo

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