What is Unemployment?

Wednesday, 26 August 2009 08:14 Last Updated on Tuesday, 10 August 2010 08:30
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ILO LogoWhen you are out of work you know exactly what unemployment means but what do the unemployment rates quoted in the media mean? The rate most often quoted in the USA is known as the U-3 rate with another statistic, the U6 rate, sometimes quoted in comparison. The difference between the two rates is very significant. As of March  2010 the U-3 rate was 9.7% compared to the U-6 rate of 16.9%. So are you a U-3 person, a U-6 or something else altogether?

If you are receiving unemployment insurance benefits you are included the U-3 unemployment rate. If you are not receiving UI benefits, then you may or may not be counted in the U-6 rate. 

The BLS' U-3 rate conforms to the  stricter ILO definition of unemployment. As defined by the International Labour Organization:

"unemployed workers" are those who are currently not working but are willing and able to work for pay, currently available to work, and have actively searched for work.  Individuals who are actively seeking job placement must make the effort to: be in contact with an employer, have job interviews, contact job placement agencies, send out resumes, submit applications, respond to advertisements, or some other means of active job searching within the prior four weeks.

The US Bureau of Labor Statistics defines U-6 as:

The U-6 unemployment rate includes the 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. Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. For more information, see "BLS introduces new range of alternative unemployment measures," in the October 1995 issue of the Monthly Labor Review.

The ILO also says not all people out of work are classified as unemployed. Those who have not actively sought work in the last four weeks and/or are not available to start work in the next two weeks are classified as economically inactive, rather than unemployed, in accordance with ILO guidelines.

Some view even the U-6 rate to understate the real unemployment situation. A proportion of the "economically inactive" need to be counted as well.



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