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Which Measurement of Unemployment is the Most Accurate?

In the United States, the Bureau of Labor is responsible for tracking the percentage of people who are unemployed, seeking employment, and/or receiving unemployment benefits. However, a specific definition is used to determine whether an individual is “officially” unemployed in the U.S. According to the U-3 definition, you are considered unemployed by the Bureau of Labor if you are seeking employment and have searched for a job within the last four weeks.

What is Missing From This Measurement?

The U-3 definition is the most commonly used form of measurement when tracking individuals who are actively seeking employment. However, economists believe that this definition may actually be missing three of the following major factors:

  • Individuals who are unemployed may be discouraged from long-term unemployment. As a result, these unemployed individuals have stopped looking for work because they believe they do not have a chance to find a job. In most cases, these individuals would work if they had the chance to obtain employment.
  • Individuals who are working on a part-time basis are not considered unemployed under the U-3 definition. For these individuals, they would rather be working on a full-time basis, but they have not been able to find full-time work.
  • Individuals who are underemployed are not considered “officially” unemployed in the United States. This problem is seriously affecting qualified and educated youth who are graduating college or university and finding that they cannot find jobs in their specific fields of expertise. For instance, an individual with an engineering degree is working at a McDonald’s because this is the only job that was available at the time of the job search.

What is Being Done to Address This Issue?

The Bureau of Labor Statistics (BLS) has attempted to address this problem by developing a second definition of what it means to be unemployed in the U.S. Using the U-6 definition, two of the previously mentioned factors are addressed. According to BLS, the U-6 definition includes all individuals who are “marginally attached to the labor force.” In addition, the U-6 definition also applies to individuals who are employed on a part-time basis due to job availability and the state of the economy at the time of the job search. In specific, individuals who are marginally attached to the U.S. labor force are unemployed, but they are also not seeking work. However, these individuals are prepared to take on a new job if one was to become available. Therefore, these individuals have a job-market related reason for being unemployed. Furthermore, the following definitions are six forms of measuring unemployment according to the BLS:

  • U-1 definition: Individuals who have been unemployed for 15 weeks or longer.
  • U-2 definition: Individuals who have lost their jobs or completed temporary/contract jobs.
  • U-3 definition: Individuals who are completely unemployed.
  • U-4 definition: Individuals who are unemployed and discouraged to seek out work.
  • U-5 definition: Individuals who are unemployed, discouraged to find work, and marginally attached to the labor force.
  • U-6 definition: Individuals who are unemployed and marginally attached to the labor force through part-time employment due to economic and job-market related reasons.

However, the U-3 definition and U-6 definition are the two forms of measurements that are considered the most accurate and the most useful according to the U.S. Bureau of Labor Statistics.

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