STOCK MARKET WATCH -- Monday, 27 July 2015

[Demeter]

28. Measuring unemployment

http://econbrowser.com/archives/2015/07/measuring-unemployment

New claims for unemployment insurance this week came in at the lowest level in over 40 years. How much slack can there be left in the labor market?


Initial claims for unemployment insurance, weekly, 1967-01-07 to 2015-07-18. Source: FRED.

The most common measure of unemployment (known as U3) counts the number of people who are not currently working and are actively looking for a job. You’re put in that category by the BLS if you report taking active measures over the last month to find work. In June U3 amounted to 5.3% of the labor force, where the labor force is defined as the sum of U3 plus people who are currently employed. That’s well below the average rate of 6.5% seen over the last 40 years.


U3 unemployment rate, monthly 1948:M1 to 2015:M6. Source: FRED.

But if you simply count the number of people who are working as a percent of the population 16 years and over, you come up with only 59%. That’s up a little from the lows reached during the Great Recession, but significantly below what it had been over the last several decades.



...And there are a number of people who say they’re employed, but only part-time, and are hoping to get a full-time position. When we add these to the U5 count, we get the broader unemployment measure known as U6. Last month the U.S. unemployment rate as measured by U3 was 5.3%, but when measured by U6, it came in at 10.5%.


U.S. unemployment rate as measured by U3 (in red) and U6 (in blue), monthly, 1994:M1 to 2015:M6.


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