The U-6 real unemployment rate includes the underemployed, the marginally attached, and discouraged workers. It's usually much higher than the U-3 unemployment rate, which is the rate most often reported in the media. The Bureau of Labor Statistics only counts people without jobs who are included in the labor force for the U-3 rate. They must have looked for a job in the last four weeks to remain in the labor force.
The U-6 real unemployment rate is a broader definition of unemployment than the official U-3 rate. The U-6 was 7.1% in May 2022, just up from the rate of 7.0% seen in April 2022. This only slightly disrupts the overall downward trend that began in December of 2020. It still marks a vast improvement from the 22.9% rate in April 2020 which was close to the record unemployment rate of 25.6% set in May 1933.
This chart reveals the discrepancy between the unemployment rate (U-3) and the real unemployment rate (U-6) between 1994 and 2021.
Underemployed people are part-time workers who would prefer full-time jobs. The BLS counts them as being employed and in the labor force. Marginally attached workers have looked for jobs in the last year, but not in the previous four weeks. They're not included in the labor force participation rate.
Discouraged workers are marginally attached workers who aren't looking for work because they believe they can't qualify for available jobs, or because there aren't any. They're no longer counted as marginally attached when they haven't looked for a job in 12 months.
The BLS issues both the U-3 and the U-6 rates in each month's jobs report. There isn't as much media attention paid to the real unemployment rate.
How To Calculate the Real Unemployment Rate
The real unemployment rate (U-6) was 7.1% in May 2022. This was much higher than the reported unemployment rate (U-3) of 3.6%.
Three steps are used to calculate the real rate:
- Add the number of officially unemployed and marginally attached workers to those who work part time for economic reasons: 5.95 million (unemployed) + 1.5 million (marginally attached) + 4.3 million (part-time workers) = 11.75 million un- and under-employed.
- Add the number actively in the labor force to the number of marginally attached workers: 164.37 million (labor force) + 1.5 million (marginally attached) = 165.87 million total.
- Divide the total number of un- and under-employed by the total labor force, including marginally attached: 11.596 million / 165.668 million = .0708, or about 7.1%.
Compare the Real Unemployment Rate
The official unemployment rate has been a little more than half the real rate throughout the years. That remains true no matter how well the economy is doing. The unemployment real rate stayed at 6.9% as the official rate dropped to 3.9% in December 2020. Meanwhile, the unemployment rate was 10.0% in October 2009, its highest after the 2008 recession. The real rate, however, was still a much higher 17.1%.
The chart below puts things in perspective. It compares the official unemployment rate to the real rate since 1994, the first year the BLS collected data on U-6. The rates given are for January of each year.
|Year (as of January)||U-3 (Official)||U-6 (Real)||U-3 as a Percent of U-6||Comments|
|1994||6.6%||11.7%||56%||The first year BLS reported U-6|
|2000||4.0%||7.0%||57%||Stock market crashed in March|
|2002||5.7%||9.4%||61%||U-3 closest to U-6|
|2009||7.8%||14.1%||55%||High of 10.2% in October|
|2016||4.8%||9.7%||49%||Both return to pre-recession levels|
|2020||3.5%||6.9%||51%||The COVID-19 pandemic started in March|
Compare the Highest Unemployment Rates
The unemployment rate during the Great Depression surpassed 25% between March and June of 1933. Unemployment rates were calculated differently back then, but this was likely similar to the real rate today.
The official unemployment rate (U-3) reached a peak of 14.8% in April 2020. The real unemployment rate, including discouraged, marginally attached, and part-time, was 22.9%. This may give a better sense of how the labor force fared in 2020.
You could say that it took the Great Depression several years to get to the level it reached if you wanted to make a case for unemployment being worse during the 2020 recession. And the 2020 recession nearly equaled it in just a matter of months.
Frequently Asked Questions (FAQs)
What is the underemployment rate of college graduates?
In December 2021, 41.3% of recent college graduates were underemployed, or working in a job that did not require a college degree. Overall, 33.9% of all college graduates were underemployed.
What is the unemployment rate for college graduates?
As of March 2021, the unemployment rate for college graduates was 3.7%, down from 8.4% in April 2020. This number, though, doesn't take into account college graduates who are underemployed or no longer looking for work.
U.S. Bureau of Labor Statistics. "Table A-15. Alternative Measures of Labor Underutilization."
U.S. Bureau of Labor Statistics. "Data Retrieval: Labor Force Statistics (CPS)." Select "U-3, U-6, Seasonally Adjusted."
Federal Reserve Bank of St. Louis. "Unemployment Rate for United States."
U.S. Bureau of Labor Statistics. "Labor Force Characteristics."
U.S. Bureau of Labor Statistics. "Employment Situation Summary Table A."
Federal Reserve Bank of St. Louis. "Unemployment Rate."
Federal Reserve Bank of St. Louis. "Total Unemployed, Plus All Persons Marginally Attached to the Labor Force, Plus Total Employed Part Time for Economic Reasons, as a Percent of the Civilian Labor Force Plus All Persons Marginally Attached to the Labor Force (U-6)."
Federal Reserve Bank of New York. "The Labor Market for Recent College Graduates: Underemployment."
U.S. Bureau of Labor Statistics. "Unemployment Rate 3.7 Percent for College Grads, 6.7 Percent for High School Grads in March 2021."