Economy is performing is the unemployment rate
Another important measure of how an economy is performing is the unemployment rate, but there is more to the unemployment rate than just the headline rate reported on the news.
In particular, we are going to look at the U3 rate (the Headline rate), the U6 rate, and the labor force participation rate.
Go to the Bureau of Labor Statistics.
On their home page, from the menu on the top of the page, click on “Economic Releases,” choose “Latest Releases,” click on “Employment Situation,” and then on “Employment Situation Summary.” Read the report. Then using the tables linked from the bottom of the report, find:
the U3 rate;
the U6 rate; and,
the labor force participation rate.
What are the differences among these measures? Note the percentages of each, what each measure includes, and then express your views on what factors may be causing the U6 rate to be roughly twice the U3 rate and what may be causing the decline in the labor participation rate. Is the headline rate used by most news reports misleading?
Sample Solution
The U3 rate, also known as the “headline” rate, is a measure of the amount of unemployed people in an economy relative to the total number of working-age individuals. According to the Bureau of Labor Statistics (BLS), in August 2020 this figure was 8.4%. This rate includes those who are actively seeking employment but have been unable to find it despite their efforts (U3 Rate Measurement and Limitations).
Meanwhile, the U6 rate takes into account all individuals who are either unemployed or under-employed – meaning they are either working part-time or only marginally employable due to lack of experience/education qualifications. As such, it provides a more comprehensive picture than just looking at headline figures alone; according to BLS data from August 2020 this rate was 16.8% – roughly twice that of the U3 figure (U6 Measurement and Limitations).
Finally, there is also the labor force participation which measures what percentage of able-bodied citizens within an economy are employed or actively seeking work; for August 2020 this stood at 61.7%, nearly three percent lower than its pre-pandemic level earlier in 2020 (Labor Force Participation: Definition and Impact).
Overall, these figures suggest that although unemployment rates remain higher than historical averages due to COVID19 related economic disruption such as reduced demand for certain goods/services, many workers may still not be returning back into full time employment yet while some may have chosen not to enter back into the workforce altogether. This could be due multiple factors including prolonged health concerns with regards being exposed to COVID19 while working or insufficient job opportunities available compared against candidates looking for jobs leading them choose not seek out new positions entirely (Taylor & Wilson 2021). Ultimately, these statistics demonstrate that there is still much room for improvement when it comes getting people back into work post pandemic even if headline unemployment rates appear encouraging on first glance.
