Q2 2012 Unemployment Data and Analysis (U1-U6)

UPDATE: More recent data available: Q4 2012 unemployment data.

Unemployment data for the second quarter of 2012 has been released by the Bureau of Labor Statistics and there is no good news to report. Every single unemployment measure either remained the same or went up; none of them have gone down this quarter. Here’s are the headlines:

• Labor Force Participation (LFP) is unchanged this quarter at the persistently low rate of 63.8%.
• U3 remains at 8.2% this quarter, or 10% when adjusted for Obama’s starting LFP, also unchanged from last quarter.
• U6 jumped from 14.5% to 14.9% this quarter, resulting in an actual U6 rate of 16.7% when adjusted for Obama’s starting LFP.
• Because of population growth, more people are out of work even though rates remain the same. U3 unemployment remains unchanged at 8.2%, as does the labor force participation rate at 63.8%. Unfortunately, with population growth over the last quarter, there are 235,627 more individuals out of work this quarter than last.

Summary of U1-U3 Unemployment

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U1 = 4.6% (in blue)

U1 unemployment is the percentage of the labor force that has been unemployed for 15 weeks or longer. As of June 30, 4.6% of the labor force (approximately 9,212,032 individuals*) have been unemployed for more than 15 weeks. U1 unemployment is identical to last quarter, although the number of individuals included in the U1 number is up 132,182 as a result of population growth.

U2 = 4.6% (in red)

U2 unemployment is the percentage of the labor force who lost jobs or completed temporary work. As of June 30, 4.6% of the labor force (approximately 9,212,032 individuals) have lost jobs within the last quarter. U2 unemployment is up from 4.5% last quarter.

U3 official unemployment = 8.2% (in green above, blue below)

U3 unemployment is the official unemployment figure and is the proportion of the civilian labor force that is unemployed but actively seeking employment. As of June 30, 8.2% of the labor force (approximately 16,421,448 individuals) are unemployed and actively seeking work. U3 unemployment remains where it was last quarter, although more individuals are out of work when population growth is accounted for.

Summary of U4 – U6 Unemployment

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U4 = 0.5% or 8.7% when added to U3 (in red)

U4 unemployment represents discouraged workers, or those who have stopped looking for work. These discouraged workers are in addition to the unemployed individuals captured by U3 unemployment. As of June 30, 0.5% of the labor force (approximately 1,001,308 individuals) are considered discouraged, which is the same as last quarter.

U5 = 1.0% or 9.7% when added to U3 and U4 (in green)

U5 unemployment represents marginally attached workers, defined as those who “would like” and are able to work, but have not looked for work recently. These marginally attached workers are in addition to the unemployed and discouraged workers above. As of June 30, 1.0% of the labor force (approximately 2,002,616 individuals) are considered marginally attached, which is up from 0.9% last quarter.

U6 = 5.2% or 14.9% when added to U3, U4, and U5 (in purple)

U6 unemployment represents part-time workers who want to be full-time. These underemployed workers are in addition to the unemployed, discouraged, and marginally attached workers above. As of June 30, 5.2% of the labor force (approximately 10,413,601 individuals) are considered underemployed, which is up significantly from 4.9% last quarter.

Labor Force Participation and Adjusted Unemployment

Labor Force Participation (LFP) is unchanged from last quarter and remains historically low at 63.8% (also from the Bureau of LaborStatistics). Ideally, LFP should be rising. When LFP falls, that means people are leaving the labor force but, while not working, will not be counted as unemployed.

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Labor Force Participation is an important factor in determining unemployment because it affects the denominator of the official unemployment calculation. You may have heard news reports where 100,000 jobs were lost, yet the unemployment rate remained unchanged. This is the effect of labor force participation.

Obama’s Unemployment Adjusted for Labor Force Participation = 10.0%

It’s possible to adjust unemployment by equalizing the labor force participation rate over time. The following chart shows the U3 and U6 unemployment rates adjusted for the labor force participation rate at the time when President Obama was inaugurated (65.6% in Q1 2009).

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If the labor force participation rate were the same as when President Obama entered office, true unemployment this quarter would be 10% instead of 8.2%. Even worse, with the jump in U6 unemployment, the real rate of U6 adjusted for LFP would be 16.7%, up from 16.3% last quarter.

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*Individual counts are based on a current population of 313,889,600 (CensusBureau)