Estimating U-6 Labor Underutilization

by the Sandwichman

U-3: Total unemployed, as a percent of the civilian labor force (official unemployment rate).

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

It turns out that there are some 2008 annual data on part-timers and marginally attached workers that enable the reconstruction of a U-6 for 18-24 year olds. In 2008 there were 1,036,000 16-24 year olds working "part time for economic reasons" and 1,733,000 16-24 year olds "marginally attached" to the labor force. Added to the 2,830,000 officially unemployed, they bring the total of labor force underutilization in 2008 to 5,599,000 for a U6 rate of 24.3%. The U-3 rate for 2008 was 12.8%.

Assuming a constant ratio between U-3 and U-6 over time suggests a current (August 2009) U-6 rate for 16-24 year olds of 34.4%. Alternatively, assuming a constant percentage point margin between the two measures gives 29.6%. A third method, using the ratio of current U-3 to current U-6 for the general population yields an estimate of 31.5%.