Range of alternative mea-
sures of unemployment and
other forms of labor resource
underutilization

[1994 annual averages}

Measure Percent

U-1 Persons unemployed 15 weeks or longer, as a

percent of the civilian labor force .. 2.2

U-2_ Job losers and persons who completed temporary

jobs, as a percent of the civilian labor force ... 29

U-3 Total unemployed persons, as a percent of the
civilian labor force (the official unemployment

Tate)... 61

U-4 Total unemployed persons plus discouraged
workers, as a percent of the civilian labor force

plus discouraged workers... 65

U-5 Total unemployed persons, plus discouraged
workers, plus all other “marginally attached"
workers, asa percent of the civilian labor force

plus alt “marginally attached” workers .. 14

U-6 Total unemployed persons, plus all “marginally
attached” workers, plus all persons employed part
time for economic reasons, as a percent of the
civilian labor force plus all “marginally attached”

workers..... 10.9

publishes a range that is roughly comparable to the United
States’, while Mexico has developed perhaps the broadest
range of indicators, with several measures linking employ-
ment status with levels of compensation." The Bureau has
compiled data that have facilitated international compari-
sons of the range of indicators U-1 through U-7 across nine
foreign countries,'*

Impact of the redesign on the measures

The 1994 redesign had an impact on the data derived from the
CPs, and hence the series used in the range U~1 through U-7,
in two ways: first, a number of changes made to the
questionnaire and overall survey methodology affected the
measurement of employment, unemployment, and persons not
in the labor force; and second, several definitional changes
were introduced. (The appendix gives a more complete
discussion of the effects of the redesign on the indicators.)

As regards measurement, the most significant change oc-
curred in estimating the number of persons classified as
employed part time for economic reasons. The figure was

sharply lower under the redesigned survey, as respondents
were explicitly asked about their desire and availability for
full-time work. In the past, this information was inferred
indirectly from other survey questions.

The most substantive definitional change concerned
persons classified as discouraged workers. Considerable
tightening of the requirements for discouraged worker status
reduced the number of persons so classified by about half.
Estimates of the duration of unemployment, the number of
job losers, and the number of unemployed persons seeking
full-time jobs also were affected to varying degrees by the
questionnaire and other changes in the redesigned cps.

The redesigned cps provides new, as well as more de-
tailed, information on the employment status of individuals,
particularly persons classified as not in the labor force. First,
more extensive questions on the reasons people do not enter
the labor market permit a greater understanding of the fac-
tors that limit labor market participation for some individu-
als. In addition, all respondents in the survey classified as
not in the labor force are now queried about their desire and
availability for work; in the past, these questions were asked
of just a quarter of the monthly sample. As a result, esti-
mates of the number of discouraged workers are now made
on a monthly, rather than quarterly, basis (although season-
ally adjusted data are not yet available).

The new set: U-1 through U-6

After evaluating the impact of the redesigned cps on the
original range of alternative unemployment measures and
assessing how newly collected data could be used to con-
struct fresh measures that might be more relevant for today’s
data users, the Bureau has developed a modified range of
alternative indicators. Annual averages for 1994 for the new
range, entitled “alternative measures of unemployment and
other forms of labor resource underutilization,” are presented
in exhibit 2. The change in the title suggests a slightly dif-
ferent emphasis and interpretation of the measures. Rather
than implying a range of unemployment definitions, these
indicators focus on different types of joblessness or incorpo-
rate different measures of labor resource underutilization,
Several of Shiskin’s original measures have been re-
tained. U-1 and U-2 are conceptually and definitionally
identical to the first two measures in the original range,
although the aforementioned survey changes have led to
small “breaks in series.” Other things being equal, U~1,
the percent of the labor force unemployed 15 weeks or
longer, is slightly higher under the redesigned survey than
in the past, while U-2, the percent of the labor force that is
unemployed because persons lost their last jobs or were in
temporary jobs that ended, is slightly lower. These concepts
are still relevant today, and it seemed reasonable to retain

Monthly Labor Review October 1995 23



Unemployment Measures

as well as the newly identified category of persons whose tempo-
rary jobs have ended—was somewhat higher under the old survey
questionnaire and methodology than with the redesigned survey.
Research to date has not reached any definitive conclusions as to
the cause of this decline, but it seems to be related to the combined
effects of various changes in wording in the new questionnaire. The
net result, which includes the slightly higher labor force level men-
tioned above, is a lower proportion of individuals falling under
U2 in the redesigned ces than under the pre-1994 survey.

Effects on indicator U-3, the number of unemployed persons aged
25 and older, as a percent of the civilian labor force aged 25 and
older (the unemployment rate for persons aged 25 and older). The
number of unemployed adults was slightly lower under the old sur-
vey than with the redesigned crs, but the adult labor force expanded
by about the same proportion; as a result, the overall impact of the
redesigned survey on the unemployment rate for persons aged 25
and older was minimal.

Effects on indicator U-4, the number of persons seeking full-time
jobs, as a percent of the full-time labor force (the unemployment
rate for full-time workers). The number of unemployed persons
seeking full-time work was affected only slightly in the redesigned
cps, consistent with the small positive effect on overall unem-
ployment. However, the full-time labor force was more significantly
affected.

Prior to the redesign, employed persons reported as working full
time (35 or more hours) during the reference week were automatically
classified as full-time workers and were not asked questions about the
number of hours they usually logged. In addition, all persons working
part time for economic reasons were considered part of the full-time
labor force. In the redesigned crs, all workers are asked about their
usual hours directly, prior to being asked questions on the number of
hours they actually worked. Thus, usual hours, rather than actual hours,
now form the basis for delineating full- or part-time status. This
change, combined with numerous other changes in the questionnaire,
is associated with a slight decrease in measured full-time employ-
ment in the redesigned survey (and thus in the full-time labor force),
compared with the old survey. The small increase in unemployed per-
sons seeking full-time jobs, taken in conjunction with the slightly lower
full-time labor force, yields a jobless rate for full-time workers (U-4)
that is slightly higher in the redesigned survey than under the old crs.

Effects on indicator U-5, the number of unemployed persons, as a
percent of the civilian labor force (the official unemployment rate).
The numerator of U-S, the overall number of unemployed persons,
as Officially defined, showed a modest increase in the redesigned
cps. At the same time, the denominator, as indicated above, also
rose only slightly. The net result is that, other things remaining
equal, the official unemployment rate is only marginally higher—
an estimated 0.2 percentage point—under the redesigned crs than
under the survey prior to 1994.3

Effects on indicator U-6, the number of persons seeking full-time
Jobs, plus one-half the number of persons seeking part-time jobs,
plus one-half the number of persons employed part time for eco-
nomic reasons, as a percent of the civilian labor force less one-half
of the part-time labor force. Alternative indicator U-6 was mark-

26 Monthly Labor Review October 1995

edly affected by changes in the measurement of persons working
part time even though they would have preferred full-time employ-
ment, Such persons are defined as those who want and are available
for full-time work, but who have had to settle for part-time employ-
ment because their hours were cut back or because they could not
find full-time jobs (the main two reasons). Prior to the redesign,
information on a person’s desire and availability for full-time work
was inferred from his or her responses to a question on reasons for
working less than 35 hours a week. Under the redesigned survey,
persons who usually work part time are asked explicitly about their
desire and availability for full-time work. This change in method-
ology led to substantial reductions in the number of persons classi-
fied as working part time for economic reasons. (The group is about
20 percent smaller than in the past.) Principally for this reason,
the calculated rate for U-6 would be somewhat higher under the
old cps than under the new survey.

Effects on indicator U~7, the number of persons seeking full-time
jobs, plus one-half the number of persons seeking part-time jobs, plus
one-half the number of persons employed part time for economic
reasons, plus the number of discouraged workers, as a percent of the
civilian labor force plus the number of discouraged workers less one-
half the part-time labor force. The most marked definitional change
in the redesigned cps dealt with persons classified as discouraged
workers. In the old survey, persons out of the labor force who indicated
a desire for work and a job-market-related reason for not currently
looking for work were classified as discouraged workers, provided
that no reasons to the contrary were also offered. This definition had
been criticized in the 1979 presidential commission review as being.
too subjective.‘ In the revised crs, discouraged workers were redefined
as persons who indicate explicitly in the survey that they want and are
available for a job, have looked for work in the past year, and have
given a job-market-related reason for not currently looking for work.
Among such reasons are the belief that no work was available, the
belief that searching for work would be unsuccessful, the belief that
one lacks the requisite skills or education, and the belief that one
would face discrimination at some point in the job search. The
definitional change dramatically reduced the number of discouraged
workers measured in the redesigned survey. (The group is about 50
percent smaller.) This, plus the aforementioned reduction in the
number of persons working part time for economic reasons, led to a
rate for U-7 that would be markedly higher in the old survey than
under the new one,

Footnotes to the appendix

| While itis difficult to make precise comparisons, enough is now known
about the impact of the redesignedcps on the various labor force series used in
the original range of unemployment indicators, that qualitative comparisons
can be made with a high level of confidence. (See Anne E. Polivka and Stephen
M. Miller, “Thecrs Afier the Redesign: Refocusing the Economic Lens,” in
National Bureau of Economic Research, conference volume, forthcoming.

2 Under dependent interviewing, the duration of unemployment is automati-
cally updated by 4 or S weeks if a person who is in the survey in one month is
found to be unemployed in the next.

+ Polivka and Miller, “Thecrs After the Redesign.

‘Counting the Labor Force (National Commission on Employment and
Unemployment Statistics, Labor Day 1979), pp. 44-49.



Unemployment Measures

averages, 19.
Percent

Altemative unemployment indications, U-1 through U-7, seasonally adjusted quarterly
48-93

1948

1992

tor and denominator? Shiskin assumed that people classi-
fied as discouraged workers—those who wanted work, but
who were not currently looking because they believed that
their search would be futile'-—very much resembled the
unemployed and therefore should be counted as such. (Be-
cause these persons were not looking for work at the time of
the survey, they were officially classified as not in the labor
force.) Over the years, the possibility of counting this group
as unemployed has been broached; indeed, an important
minority of the last presidentially appointed commission to
examine the concepts of employment and unemployment
supported the notion of including a redefined measure of
discouragement in the count of the unemployed.'!

Note that, whereas U-6 and U-7 had a certain additivity
with U-S, this was not the case for U-5 with respect to U-1
through U-4. The “lower four” measures were totally inde-
pendent, not only of one another, but also of the official mea-
sure. This may have created some confusion, but it served to
emphasize the variability in the uses of these measures.

U-1 through U-7 prior to the redesign

The Bureau began regular publication of data on the range
of alternative unemployment measures U-1 through U-7 in

22. Monthly Labor Review October 1995

The Employment Situation in January 1977. Since then, the
most popular of the measures among both researchers and
the media, other than the official unemployment rate (U-5),
has been U-7, the highest numerically.’

The Bureau generally did not use the range U-1 through
U-7 in its analyses, nor has there been much in the way of
published research using it outside the Bureau. Aside from the
fact that the proper focus is on the official statistics, it is impor-
tant to note that there is little “value added” analytically in
tracking the alternative measures over time. While it is true
that each indicator provides a different point estimate of “un-
employment,” all seven measures have essentially moved in
lockstep across the business cycle. (See chart 1.)

Many of the individual labor force measures reflected in
the range U-1 through U-7 have, however, been routinely
examined in The Employment Situation and have frequently
been the subject of more indepth study. Also, several of the
component series contained in the range have evidenced
meaningful long-term trends—such as the upward trend in
the incidence of involuntary part-time employment—but
these developments typically have been analyzed quite ef-
fectively outside the U-1 through U-7 framework.

Several other countries have introduced their own ranges of
alternative unemployment indicators. Canada, for example,



Unemployment Measures

the measures, particularly because there have been recent
shifts in the unemployment picture in terms of the duration
of and reasons for unemployment.'*

The official unemployment rate is now U-3. The original
indicators U-3 and U4 are no longer included in the new
range of alternative measures, in part because one reflected
a personal (U-3, persons 25 years and older) rather than an
economic characteristic, and more importantly, because both
brought in the notion of reduced labor force bases.'®

The new indicators U-4 through U-6 are markedly
different from their counterparts in the original range of
alternative unemployment measures. U-4 is the number of
unemployed persons plus persons classified as discouraged
workers, taken as a percent of the labor force plus discouraged
workers. In order to be classified as discouraged in the
redesigned survey, persons must explicitly want and be
available for work and have searched for work in the prior
year, even though they are not currently looking for a job
because they feel their search would be in vain. The inclusion
of U-4 coincides with the views of those who support a
definition of unemployment that incorporates labor market
discouragement.

U-5 adds other “marginally attached” workers to U-4,
with the denominator being the civilian labor force plus all
“marginally attached” workers."’ This measure, using data
not available prior to 1994, adds to the unemployed all
persons who want and are available for a job and have re-
cently searched for work, regardless of their reason for not
currently looking. Hence, it includes those who are not
currently looking for work for reasons such as child-care or
transportation problems. While these persons may not be as
closely attached to the labor market as are discouraged
workers, they do represent potential labor resources, in the
sense that they have recent job search activity and are
currently interested in reentering the job market under
certain conditions.

The highest alternative indicator, U-6, represents the
number of unemployed persons, plus all “marginally
attached” workers, plus all persons working part time for
economic reasons, as a percent of a labor force augmented
to include “marginally attached” workers. This is the most
comprehensive of the new range of alternative measures,
effectively treating workers who are visibly underemployed
and all persons who are “marginally attached” to the labor
force equally with the unemployed. Hence, U-6 provides

Footnotes

the largest conceptual break with the official measure of
unemployment; it is expected to be useful to those who want
a single measure to represent a general view of the degree
to which existing and potential labor resources are not being
utilized.

As described earlier, the highest two of Shiskin’s meas-
ures were calculated on essentially a full-time equivalent
basis, in which full-time workers and persons seeking full-
time jobs were treated as whole persons and persons working
Part time for economic reasons and those seeking part-time
jobs, as well as the part-time labor force, were given half
weights, This weighting was discontinued in the new U-6,
principally in the interest of simplicity. Persons using the
original higher level measures were confused by the
weighting and, indeed, often rejected those measures in favor
of unweighted estimates. For certain purposes, however,
weighting has benefits, and certain individuals may wish to
continue using some form of the old U-6 and U-7
measures."*

‘THE BLS ALTERNATIVE UNEMPLOYMENT MEASURES have had some
degree of popularity ever since their introduction, both in the
United States and in other countries that use them (or varia-
tions thereof). As mentioned earlier, however, where there is
interest, it has tended to be fairly narrow. That is, people who
use the measures appear to limit their use to a contrast between
the official measure of unemployment (in the current scheme,
U-3) and the highest available measure (U-6). One does not
hear much about any of the other alternative measures, either
below the official unemployment rate or above it, until the top
is reached. It is for this reason, in addition to the others men-
tioned earlier, that the new set of alternative measures is more
circumscribed below the official unemployment rate. At the
upper end, one additional measure is featured, and it comes
about solely because of the introduction in 1994 of additional
information on persons not in the labor force into monthly data
collection in the CPs.

The Bureau of Labor Statistics believes that the range U-1
through U-6 represents a useful, though by no means fully
comprehensive, set of alternative measures of unemployment
and labor market underutilization. Users will want to examine
this set and perhaps create some sets of their own. Indeed, the
Bureau encourages such efforts. In the meantime, the new al-
ternative measures will be published in The Employment Situ-
ation beginning early in 1996.9 o

1 For information on the redesigned cps, see Sharon R. Cohany, Anne B.
Polivka, and Jennifer M. Rothgeb, “Revisions in the Current Population Sur-
vey Effective January 1994,” Employment and Earnings, February 1994, pp.
13-37.

2 Definitionally, it was not changed at all, except for the elimination of a
small group of persons, namely, those who volunteered the information that

24 Monthly Labor Review October 1995

they were waiting to start a new job within 30 days, most of whom undoubt-
edly meet the jobseeking tests in any case. ‘There were, however, changes in the
wording of nearly all the questions—particularly as regards persons on lay-
off —that affected the underlying data in limited ways. See Cohany, Polivka,
and Rothgeb, “Revisions in the Current Population Survey.”

3 For a summary of the development of employment and unemployment



Unemployment Measures

John E. Bregger
and
Steven E. Haugen

John E. Bregger
recently retired from his
Position of Assistant
Commissioner for
Current Employment
Analysis, and Steven E.
Haugen is an
economist in the
Division of Labor Force
Statistics, Bureau of
Labor Statistics.

BLS introduces new range of
alternative unemployment measures

Some of the original pts unemployment indicators,
U-1 through U-7, have been retained

as part of the new range, U-I through U-6;
several new measures make use of data

heretofore unavailable from the crs

n 1994, the Current Population Survey (CPS)

introduced a totally revamped question-

naire and modernized data collection system.
The principal aim of this redesign was to obtain
more accurate and reliable information on the
labor force activities of the population. For the
most part, the basic concepts and definitions used
in the measurement of employment and unem-
ployment remained intact. Some labor market
Measures, however, were fundamentally altered,
either because of definitional changes or because
of improved measurement of existing concepts. At
the same time, several new data series were created
from additional information collected in the new
survey.!

The redesign of the survey and associated
changes in the measurement of certain labor mar-
ket concepts required changes in the publication
of some CPs data. In particular, publication of the
tange of unemployment measures based on vary-
ing definitions of unemployment and the labor
force, better known as the alternative unemploy-
ment indicators, U-1 through U-7, was tempo-
rarily suspended, pending research into the effects
of the new survey on these measures and into the
possibility of modifying the range by using newly
collected data.

This article provides a brief history of the old
range of alternative measures, U-1 through
U-7, and reviews the impact of the redesigned
CPS on the pre-1994 series. Its principal purpose
is to introduce a new set of measures. The
revised set includes several of the former
measures, but some important new ones are
Presented that take advantage of fresh data
collected in the redesigned survey.

Why a range of measures?

The measurement of unemployment was not
markedly changed in the redesignedcrs.? Indeed,
since the inception of the survey in 1940, only
relatively minor changes have been made to the
official definition of unemployment, despite
numerous outside reviews and ongoing assess-
ments by academicians, business and labor
organizations, and various advocacy groups.’ The
official measure has withstood the test of time
largely because of its objectivity. As measured via
the cps, the employment status of individuals is
determined solely by their work-related and job-
search activities during a specific reference week.
In essence, persons who did any work at all during
the reference week are counted as employed, while
those who did no work, but who searched for a job
(sometime in the 4 weeks prior to the survey) and
were currently available to take one had it been
offered, are classified as unemployed. Those who
met neither test are “not in the labor force.”

The inherent objectivity of the official meas-
ure also explains, in part, why it and other such
statistics are occasionally subject to criticism.
Without question, the consequences of unem-
ployment are more serious for some workers than
for others, and some users would like to have a
more narrowly targeted measure. At the other
end of the spectrum, there are those who feel
that the official statistics understate the full di-
mensions of the unemployment problem.‘ This
view holds that any measure of joblessness
should reflect not only those officially classified
as unemployed, but also all persons who want to
work, even if they are not actually looking for

Monthly Labor Review October 1995 19



statistics in the United States, and a review of those statistics, see John E.
Bregger, “Establishment of a new Employment Statistics Review
Commission,” Monthly Labor Review, March 1977, pp. 14-20; and
Steven E. Haugen and John E. Bregger, “Employment and un-
employment,” in Douglas Greenwald, ed., McGraw-Hill Encyclopedia
of Economics, 1994, pp. 345-53.

4 See, for example, “Understating Unemployment,” Washington Journal-
ism Review, November 1992, pp. 35-36.

5 See Measuring Employment and Unemployment (President's Committee
to Appraise Employment and Unemployment Statistics, 1962); and Counting
the Labor Force (National Commission on Employment and Unemployment
Statistics, Labor Day 1979).

6 There is widespread agreement that persons with incomes below the official
poverty threshold, who are generally defined as “poor,” experience hardship, The
hardship endured by those living in families is often gauged by looking at family
income and relating it 1o the poverty threshold for a family of a given size, where
the threshold has been adjusted for the assumption that family resources are shared,
In the case of unrelated individuals, individual-level income figures and their
associated poverty thresholds must be used. Estimates of the number of persons
and families with poverty-level incomes are produced by the Census Bureau and
published in their annual Series P--60 and P-70 reports. In addition, the Bureau
‘of Labor Statistics estimates the number of poor persons with work experience.
See, for example, A Profile of the Working Poor, 1993, Report 896 (Bureau of
Labor Statistics, July 1995).

7 Julius Shiskin, “Employment and unemployment: the doughnut or the
hole?” Monthly Labor Review, February 1976, pp. 3-10; quote on p. 4.

8 Counting the Labor Force, p. 49. The Bureau began to phase out publica-
tion of the labor force series that included the resident Armed Forces in June
1991, coincidently with the military buildup associated with the Persian Gulf
conflict, because of limitations in the availability and reliability of the data,

9 Note that data on discouragement were published only on aquarterly basis
‘over the 1967-93 period. The series was therefore placed last in the sequence,
in order to have only one quarterly measure; otherwise, in all likelihood, U-6
would have been unemployment plus discouragement, and U-7 would have
introduced involuntary part-time workers.

10 As will be discussed later, the definition of discouraged workers was
changed in the redesigned crs introduced in January 1994, For further infor-
mation, see the appendix.

11 Counting the Labor Force, p. 56.

12 Some analysts modified U-7 by adding ai! involuntary part-time workers
to the unemployed and discouraged worker totals, an approach that, in 1993,
added roughly 4 million workers to the numerator of U-7 and raised the rate by
about 2-1/2 percentage points.

13 For a description of Canada’s altemative measures of unemployment, see
Mary Sue Devereaux, “Altemative measures of unemployment,” Perspectives
on Labour and Income, Winter 1992, pp. 35-43. For information on the range
of labor underutilization rates for Mexico, see Susan Fleck and Constance
Sorrentino, “Employment and unemployment in Mexico's labor force,”
Monthly Labor Review, November 1994, pp. 3-31.

14 Constance Sorrentino, “International unemployment indicators, 1983-
93," Monthly Labor Review, August 1995, pp. 31-50.

15-The share of the unemployed who have been jobless for extended periods
of time has remained intractably high in recent years, and there also have been
shifts in the number and composition of job losers, For a discussion of these
developments, see “Recent Job Losers Less Likely to Expect Recall,” Issues in
Labor Statistics, Summary 92-8, July 1992; and “Long-term Unemploy-
ment Remains High During Recovery,” issues in Labor Statistics, Summary
95-11, September 1995.

16 The original indicators U-3 and U--4, the unemployment rates for
persons aged 25 and older and for persons seeking full-time jobs, respec-
tively, were dropped from the range of alternative indicators because they
focused more on the personal characteristics of unemployed workers than
on a specific type of unemployment or underemployment or on types of
individuals. Moreover, a troubling, inconsistent feature of the original
range was that the upward progression in the size of the numerator (the
number of unemployed workers, variously defined) was accompanied in
measures U-3 and U-4 by a diminution in the size of the denominator
(the labor force). The new range, U- ugh U-6, is more consistent in
this area, in that the same base (the ian labor force) is used in mea-
sures U-I through U-3, and the base is then augmented in U-4 through
U-—6 as the labor resource characteristics under consideration are broad-
ened. It should be noted that, although the original U-3 and U-4 series
are not included in the new range, they are regularly published in The
Employment Situation.

17"Marginally attached” workers are persons who want a job, are explicitly
available for work, and have looked for work sometime in the prior year, but
are not currently looking. This subcategory of persons classified as not in the
labor force includes discouraged workers (persons who have given a job-mar-
ket-related reason for not currently looking for work), as well as those persons
who have given other seasons for not looking.

18 The Bureau can produce a version of the original U-6 on a weighted
basis for interested users.

19 As currently envisioned, alternative indicators U-I through U-3 will be
published on both an unadjusted and a seasonally adjusted basis, while indica-
tors U-4 through U-6 will be available on an unadjusted basis only, until suf-
ficient data have been collected to produce a reliable seasonally adjusted series
for discouraged and other “marginally attached” workers.

APPENDIX: Impact of the cps redesign on the original indicators, U-1 through U-7

A totally redesigned Current Population Survey (cps) was imple-
mented in January 1994, the first major modification to the survey
since 1967. Although the alterations to labor force concepts were
in general quite limited (the major exception being the substantial
redefinition of discouraged workers), the introduction of a rede-
signed questionnaire and modernized survey methodology had a
marked effect on many labor force measures. Altogether, these
changes led to a number of incomparabilities in various series be-
tween 1994 and earlier years. The impact of the changes on the
original range of alternative indicators, U-1 through U-7, varied
significantly and is summarized in what follows.’

Effects on indicator U-1, the number of persons unemployed 15
weeks or longer, as a percent of the civilian labor force. Both the
numerator and denominator of U-1 were affected by the redesign
of the crs. The duration of unemployment generally rose under the

new survey methodology. This effect is likely related to provisions
that allow more flexibility in reporting the duration of unemploy-
ment—respondents can now report duration in either weeks,
months, or years, versus only weeks under the old questionnaire—
and to the introduction of dependent interviewing in the measure-
ment of unemployment duration in the redesigned survey. The
denominator in U-1, the civilian labor force, was also somewhat
higher in the redesigned survey than under the old cps, due to in-
creases in overall levels of unemployment and employment. The
net impact on U-I, other things remaining equal, is a slightly higher
percentage of the labor force that falls under the category of long-
term unemployed.

Effects on indicator U-2, the number of job losers, as a percent of

the civilian labor force. The number of unemployed persons clas-
sified as job losers—including persons on layoff who expect recall,

Monthly Labor Review October 1995 25


Unemployment Measures

jobs on a current basis. Some go even further, arguing for
the inclusion of underemployed individuals—those who are
working, but who have had their hours cut back or who have
had to settle for less work than they wanted (a 1-day job, for
example) or for a job that failed to make use of all their
skills,

More fundamentally, because unemployment statistics are
used for different purposes, the official concept and meas-
urement may not perfectly suit the needs or interests of all
people. Most analysts monitor unemployment because of its
role as a cyclical indicator, a measure to be used to gauge
current economic conditions and provide some insight into
future economic performance. In this role, the measurement
of unemployment represents the degree to which available
labor resources are not being utilized in the economy. But
even though there is broad support for the official statistics
when used in this capacity,’ different interpretations of what
is meant by “available labor resources” and “efficient utili-
zation” remain, so some users find the need for a variety of
measures.

As an example of these perceived limitations, some look
upon unemployment data as measures of economic hard-
ship—that is, as counts of the number of persons who are
suffering because their most basic economic needs are not
being met. It turns out that unemployment statistics in and
of themselves are not particularly useful for this purpose, in
large part because, ideally, the measurement of economic
hardship requires information on income, and hardship is
usually perceived as a family rather than an individual con-
dition.© This complexity notwithstanding, some users tend
to associate specific types of joblessness with given levels of
hardship and therefore focus their attention on either selected
worker groups, on the one hand, or a broader array of groups,
on the other.

U-1 through U-7

The recognition of the diversity in the uses of unemploy-
ment data led Julius Shiskin, former Commissioner of the
Bureau of Labor Statistics, to formulate and introduce the
range of labor market measures U-1 through U-7 (similar
to the Federal Reserve series of money supply measures) in
1976. Pointing out that “no single way of measuring unem-
ployment can satisfy all analytical or ideological interests,””
Shiskin designed a range of unemployment indicators to ac-
commodate many different needs for the data. Most of the
measures presented were simply existing data series that cap-
tured different characteristics of unemployment, but two were
constructed through the combination of several series.
Shiskin made it quite clear that neither he nor the Bureau
was embracing any of the value judgments inherent in the
selection of alternative measures, but rather that the meas-

20 Monthly Labor Review October 1995

ures were being presented simply as a variety of unemploy-
ment indicators that recognized varying views on who should
be classified as unemployed.

Shiskin’s measures are presented in exhibit 1, using 1993
annual averages. The measures are ranked from the most re-
strictive (U-1), which excludes many persons who would be
classified as unemployed in the official measure (U-S), to the
broadest definition (U-7), which adds certain groups to the
official estimate. Each measure is expressed as a percentage—
that is, the proportion—of an associated labor force. In all of
the measures except U-1 and U-2, each percentage is con-
structed as an unemployment rate. U-1 and U-2 are not unem-
ployment rates per se, but represent specific types of jobless-
ness as a share of the entire labor force.

The first four measures were predicated on the assump-
tion that selected subsets of persons officially classified as
unemployed experience more hardship (loss of income) than

| Exhibit 1. Jim Range of unemployment
measures based on varying
definitions of unemployment
and the labor force (the Shiskin
group)

[1993 annual averages}

Measure

U-1 Persons unemployed 15 weeks or longer, asa

percent of the civilian labor force ..... 24

U2 Job losers, as a percent of the civilian labor force ... 37

U-3 Unemployed persons aged 25 and older, as a percent
of the civilian labor force aged 25 and older (the
unemployment rate for persons 25 years and older)

56

U-4 Unemployed persons seeking full-time jobs, as a
percent of the full-time labor force (the unemploy-

ment rate for full-time workers) .... 65

U-5 Total unemployed persons, as a percent of the

civilian labor force (the official unemployment rate) .. 68

U-6 Total persons seeking full-time jobs, plus one-half
of persons seeking part-time jobs, plus one-half of
persons employed part time for economic reasons,

as a percent of the civilian labor force less one-half

of the part-time labor force ... 93

U-7 Total persons seeking full-time jobs, plus one-half
of persons seeking part-time jobs, plus one-half of
persons employed part time for economic reasons,

plus discouraged workers, as a percentof the

civilian labor force plus discouraged workers less

one-half of the part-time labor force ..... 10.2



others and should therefore warrant more attention. The first
measure, U-1, was based on the duration of unemployment:
the number of persons unemployed 15 weeks or longer as a
percent of the civilian labor force, Its inclusion rested on the
premise that unemployment should be counted only if it
jasted long enough to cause severe financial loss and that
any income lost from shorter spells could be readily made up
from savings, unemployment insurance, or other sources.
The selection of the 15-week threshold was in keeping with
the informal identification of 15 weeks and longer as “long-
term unemployment.”

Shiskin’s second indicator, U-2, was the number of un-
employed job losers, as a percent of the civilian labor force.
He assumed that an involuntary (and likely unexpected) job
loss entails a larger loss of income than does unemployment
that occurs for other reasons, such as a job search initiated
because a person has quit his or her current job to look for a
better one or because the person recently has entered (or re-
entered) the job market.

The third measure, U-3, originally comprised unemployed
heads of households and was expressed as a percentage of all
heads of households in the labor force—that is, the unemploy-
ment rate for household heads. The selection of this measure
was based on the belief that unemployment affecting the prin-
cipal earner in a family was a serious matter and potentially a
source of substantial hardship for the entire family, while a job
loss among other workers might be associated with less dire
consequences. Shortly after the initial formulation of the range
of measures U-1 through U-7, however, publication of data on
heads of households—mostly identified in the survey as the
male in the household—was discontinued. In 1978, U-3 was
redefined as the unemployment rate for persons aged 25 and
older, eliminating the gender bias in the original measure and
still restricting, for all practical purposes, the universe to those
persons most likely to be supporting households.

Alternative indicator U-4 was the number of unemployed
persons seeking full-time jobs, as a percent of the full-time
labor force. This measure was included because it was felt
that full-time workers were more likely to be primary earners
than were those who worked part time. Hence, the conse-
quences of unemployment for full-time workers who became
unemployed could be viewed as more adverse than for part-
timers,

The official unemployment rate was U-S. This measure was
recognized as an objective assessment of the underutilization
of labor resources, in that it included all persons 16 years and
older who were not working, but were available for work and
actively seeking employment, taken as a percent of the labor
force (the employed plus the unemployed). Thus, unlike U-1
through U-4, U-S excludes no one for any personal or eco-
nomic reason,

Beginning in 1983 and extending through 1993, U-5 was

expanded into two measures, with the introduction of the
resident Armed Forces (those stationed in the United States)
into some of the official labor force estimates. The expan-
sion came about as a result of a recommendation from the
National Commission on Employment and Unemployment
Statistics that the resident Armed Forces be included in na-
tional labor force statistics, “because similarities between
civilian and military employment outweigh their differ-
ences.”* This resulted in official rates U-Sa, which in 1983
included some 1.7 million members of the Armed Forces as
employed and thus in the labor force base (the denominator
of the measure), and U-5b, the civilian worker rate. Typi-
cally, U-Sa was one-tenth of a percentage point lower than
U-Sb, It soon became apparent that the press and public
were unimpressed, and even confused, by the distinctions
between the two measures; many people thought that mem-
bers of the military were suddenly being counted as unem-
ployed, for instance. Ultimately, publication of the measures
incorporating the resident Armed Forces was dropped else-
where, but U-Sa continued to be presented in the monthly
news release, The Employment Situation, along with the
other measures, until the entire series was suspended at the
end of 1993,

The last two measures in the list of alternative unemploy-
ment indicators excluded a portion of certain groups counted
as unemployed in the preceding measures, but added a
greater number of persons from the other employment status
categories. Hence, these measures included a larger segment
of the population among the unemployed than the official
figure did, thereby producing higher “unemployment” rates.

Iternative measure U-6 added involuntary part-time
workers to the unemployed and also introduced the no-
tion of weighting workers. U-6 defined the unemployed as
all persons seeking full-time jobs, plus one-half of all per-
sons seeking part-time jobs, plus one-half of all persons at
work part time involuntarily. Underlying this measure was
the argument that those persons who had to settle for a part-
time job or whose full-time schedules had been cut back to
part time should be considered unemployed. (The propor-
tion one-half was chosen because part-timers work, on aver-
age, about half as long per week as full-timers.) Also, per-
sons who were looking for part-time work were given half
weight among the unemployed, as those voluntarily work-
ing part time put in about half as many hours as full-time
workers. In order to express this measure in a way that was
conceptually similar to the unemployment rate, the denomi-
nator of U—6 was defined as the civilian labor force less one-
half of the part-time labor force. This construction also put
the measure on essentially a full-time equivalent basis.
The last of Shiskin’s measures, U-7, built on U-6 by add-
ing the number of discouraged workers to both the numera-

Monthly Labor Review October 1995 21