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The Unemployment Rate and Beyond: Alternative Measures

of Labor Underutilization

Summary 08-06/ June 2008  U.S. Department of Labor  U.S. Bureau of Labor Statistics

Chart 1. Alternative measures of labor underutilization, seasonally adjusted, 1994-2008

12

10

8

6

4

2

0

Percent

NOTE: Shaded area denotes recession.

SOURCE: Bureau of Labor Statistics, Current Population Survey.

 Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan.

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

U-6

U-5

U-4

U-3 Unemployment rate

U-2

U-1

The nation’s unemployment rate is widely recognized as 

a key indicator of labor market 

performance. This is in large 

part because of the objective 

manner in which the concept 

of unemployment is defined. To 

be classified as unemployed, a 

person must be without work, 

be available for work, and have 

actively searched for work. The 

official unemployment statistics have stood the test of time; 

recommendations from several 

internal and external reviews 

have resulted in only minor 

refinements to the definition of 

unemployment since its inception in 1940. 

It is recognized, however, that 

no single statistic can reflect all 

types of labor market difficulties. As a way to help assess 

labor market conditions from 

several perspectives, the Bureau 

of Labor Statistics (BLS) publishes five alternative measures 

of labor underutilization every 

month in the Employment Situation news release (http://www.

bls.gov/news.release/empsit.

t12.htm). Two of these measures are more restrictive than 

the official unemployment rate, 

and three are broader, incorporating individuals who are not 

captured in the official measure. 

All are constructed using data 

collected in the Current Population Survey (CPS). 
increase reflected the sizable rise 

in the number of persons who 

were working part time even 

though they wanted a full-time 

job--from 4.5 million to 5.2 million over the period. 

While the official unemployment rate remains the primary 

measure of changes in labor 

underutilization, the alternative 

measures discussed in this paper 

provide different views of the 

extent to which the economy 

is not fully utilizing its labor 

resources. 

For additional information, 

contact Sharon Cohany, an 

economist in the Division of 

Labor Force Statistics, Office 

of Employment and Unemployment Statistics. E-mail: cohany.

sharon@bls.gov. Telephone: 

(202) 691-6341.

Information in this summary will be made available to 

sensory-impaired individuals 

upon request. Voice phone: 

(202) 691-5200. Federal Relay 

Service: 1-800-877-8399. This 

report is in the public domain 

and may be reproduced without 

permission.

 1 The rates for U-1 and U-2 (as well 

as the official rate, U-3) go back to 1948. 

The rates for U-4, U-5, and U-6 began 

in 1994, when the most recent redesign 

of the CPS was implemented. 

While the alternative measures differ in magnitude from 

the official unemployment rate, 

they typically show very similar 

movements over the course of 

the business cycle.1 Between 

May 2007 and May 2008, for 

example, all of the alternative 

rates rose, as did the official rate. 

(See chart 1.) 

The original set of alternatives to the official unemployment rate dates back to 1976, 

when BLS, under the direction 

of Commissioner Julius Shiskin, 

developed and introduced a 

range of labor market measures 

entitled U-1 through U-7. The 

original indicators reflected the 

need for a broad range of measures. Nearly two decades later, 

as part of the 1994 redesign of 

the CPS, the alternative measures were revised, primarily 

to take into account new data 

collected in the revamped survey. The current measures are 

entitled U-1 through U-6. 

The lowest rate of labor underutilization, U-1, is the most 

restrictive, and consists only of 

the subset of the unemployed 

who were jobless for at least 15 

weeks. U-1 was 1.8 percent in 

May 2008, up from 1.5 percent 

a year earlier. (All of the figures 

in this paper are seasonally adjusted unless stated otherwise. 

Detailed definitions of the official and alternative measures 

are found in table 1, along with 

the rates for May 2007 and May 

2008.) 

The second lowest rate, U-2, 

was 2.8 percent in May 2008. 

It includes only that portion of 

the unemployed who lost their 

last job (including those who 

completed temporary jobs); it 

does not include those who left 

their last job voluntarily or who 

were new entrants or reentrants 

to the labor force. 

U-3 is the official rate of 

unemployment and the one most 

typically cited in news stories 

about the economy. It rose from 

4.5 percent in May 2007 to 5.5 

percent in May 2008, reflecting 

an increase in the number of 

unemployed persons from 6.9 

million to 8.5 million over this 

period. 

U-4 and U-5 both add selected not-in-labor-force categories 

(that is, groups of persons neither employed nor unemployed) 

to the unemployed. U-4, which 

adds discouraged workers, is 

very close to the official rate, 

since the number of discouraged 

workers—those who want a job 

but have given up the search for 

work because they believe no 

jobs are available for them—is 

small (400,000 as of May 2008, 

not seasonally adjusted) in relation to the number of unemployed persons. U-4 was 5.7 

percent in May 2008, up from 

4.7 percent in May 2007. 

U-5 adds all marginally attached workers (1.4 million in 

May 2008), including discouraged workers, to the unemployed. The rate was 6.4 percent 

in May 2008, compared with 5.4 

percent in May 2007. Marginally 

attached workers are those who 

want a job and are available to 

work now, and have looked for 

a job in the past year--but not 

in the past month--for a wide 

range of reasons that extend 

beyond discouragement over 

job prospects. 

The broadest measure of labor underutilization, called U-6, 

includes the unemployed, the 

marginally attached, and persons 

who are actually employed but 

who work fewer hours than they 

would like (sometimes referred 

to as underemployed). Among 

the alternatives to the official 

rate (U-3), U-6 yields the highest rate. Like all of the other 

measures, U-6 has increased 

over the past 12 months, rising 

from 8.3 percent in May 2007 

to 9.7 percent in May 2008. The 

Table 1. Alternative measures of labor underutilization, seasonally adjusted, selected months

[Percent]

Measure May 2007 May 2008 Difference

U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force 1.5 1.8 0.3

U-2 Job losers and persons who completed temporary jobs, as a percent of the 

civilian labor force 

2.2 2.8 0.6

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

unemployment rate) 

4.5 5.5 1.0

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

labor force plus discouraged workers

4.7 5.7 1.0

U-5 Total unemployed persons, plus discouraged workers, plus all other “marginally 

attached” workers, as a percent of the civilian labor force plus all “marginally attached” 

workers

5.4 6.4 1.0

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 

8.3 9.7 1.4 

NOTE: The civilian labor force is the sum of the employed plus the unemployed. The employed are all persons who, during the reference week, a) 

did any work at all as paid employees, worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers 

in an enterprise operated by a member of their family, and b) all those who were not working but who had jobs or businesses from which they were 

temporarily absent. The unemployed are a) persons who had no employment during the reference week, were available for work, except for temporary 

illness, and had made specific efforts to find work sometime during the 4-week period ending with the reference week, and b) persons who were waiting 

to be recalled to a job from which they had been laid off, regardless of whether they have been looking for work.