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1 1 (July 07, 2020)

handle is hein.crs/govdaqe0001 and id is 1 raw text is: xa S 1,k Introduction to U.S. Economy: Unemployment The U.S. economy has seen his toric ally high levels of unemployment as a result of the Coronavirus Disease 2019 (COVID-19) pandemic. This In Focus provides an introduction to the official unemployment rate and alternative measures of unemployment, briefly examines the reasons for unemployment, and places the unemploymentrate in abroader economic context. The Bureau of Labor Statistics (BLS) releases the official unemploymentrate, conmonly 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 IndividuaIs 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 oris not currently available for work or both, that individual is not considered part of the labor force. Figure 1 displays the official unemployment rate (U3) since 2010, which has increased sharply as aresult 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 of the labor force, employment, and unemployment can all change s imrultaneously. For example, if the number of individuals joining thelabor force outnumbers those who found work, then the unemployment rate would increase despite the increase in employment. This can happen as the economy recovers from a reces sion and individuals who had previously given up looking for workrejoin the labor force by restarting their job search. BLS reports other measures ofunemployment-called measures o flab or underutilization 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-theU3 rate plus discouraged workers (individuals who give ajob- market-related reason for not currently looking for work); (4) the U5 rate-the U4 rate plus marginally attached workers (individuals who are available to work, have expressed 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 ofunderutilization in January and May2020. Whereas the U4 and U5 rates have remained similar to the official U3 rate, each increasing by about 10 percentage points between January and May, the U6 rate has increasedby about 14 percentage points. This indicates that the number of individuals working part time for economic reasons has increased more rapidly than other underutilization measures during this recession. Figure 2. Comparison of Unemployment Rates January and May 2020 EN S ULCL\ ~ ~h ~ A\00 Source: BLS. A A '2 Updated July 7,2020

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