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1 1 (July 12, 2022)

handle is hein.crs/goveimy0001 and id is 1 raw text is: Con gressonal Research Service Inforning he IegisIative debate since 1914 Introduction to U.S. Economy: Unemployment 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 unemployment rate in a broader economic context. H ow Is the Unemployment Rate Calculated? 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 not have a job, have actively looked for work in the previous four weeks, and are currently available to work. If an individual does not have a job, but has either not looked for work in the previous four weeks or is 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 increased during the past two recession. Figure I. Unemployment Rate Source: Bureau of Labor Statistics (BLS). Notes: Gray bars denote recessions. 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, if the number of individuals joining the labor force outnumbers those who found work, then the unemployment rate would increase despite the increase in Updated July 12, 2022 employment. This can happen as the economy recovers from a recession and 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-called measures of labor underutilization-that include additional underemployed groups. These measures can provide a broader sense of labor market conditions. The most prominent alternative measure is the U6 unemployment rate, also shown in Figure 1. Alternative measures of labor underutilization include (1) the U1 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 a job- 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 work in the past 12 months); and (5) the U6 rate-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. Using the COVID-19 pandemic as an example, Figure 2 compares each measure of underutilization in February 2020 (before the pandemic began), April 2020 (the peak of unemployment), and May 2022. As a general observation, rates are largely recovered to pre-pandemic rates at this point, although there is some variation in the rate and amount of recovery. However, earlier in the pandemic, the U6 rate increased 14 percentage points as compared with the roughly 10 percentage-point increase from the U3, U4, and U5 rates. This indicates that the number of individuals working part-time for economic reasons was a more volatile category than other measures of underutilization during the pandemic. Figure 2. Comparison of Unemployment Rates Source: BLS. / S23 j4 Ms Feb rary 202f ` Api 20 0 R l

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