Wyoming Labor Force Trends

Alternative Measures of Labor Underutilization and the Recession

by: Carola Cowan, BLS Programs Supervisor

See Related Tables and Figures

The unemployment rate released each month by the Research & Planning (R&P) section of the Department of Workforce Services represents one of several calculated monthly by the Bureau of Labor Statistics (BLS).

In 2009, the BLS first published alternative measures of underemployment annual averages by state. In 2010, BLS began publishing the number quarterly, and averaging the numbers for the last four quarters of data available. R&P published articles on these alternative measures in the August 2009 and August 2011 issues of Wyoming Labor Force Trends. The BLS analyzes the alternative measures for states on a four-quarter basis to increase the reliability of the Current Population Survey (CPS) estimates, which are based on relatively small sample sizes at the state level, and to eliminate seasonality (U.S. Bureau of Labor Statistics, 2010). The CPS is a monthly survey of households conducted by the Census Bureau for the BLS from which the national unemployment rate is estimated. On the state level it provides one of several inputs to estimate the unemployment rate.

The six measures of labor underutilization are defined as follows by the BLS (U.S. Department of Labor, 2013):

• U-1: Persons unemployed 15 weeks or longer, as a percent of the civilian labor force;
• U-2: Job losers and persons who completed temporary jobs, as a percent of the civilian labor force;
• U-3: Total unemployed, as a percent of the civilian labor force (the definition of the official unemployment rate for the nation );
• U-4: Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers;
• U-5: Total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers;
• 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.

All measures of labor underutilization usually tend to move together, and by definition the U-1 is the lowest rate and the U-6 is the highest rate (see Figure).

This article shows what kind of unemployment rate changes have occurred in Wyoming's labor market from 2007 to 2012. Data for all states can be found at http://www.bls.gov/lau/stalt.htm.

Unlike the rest of the nation, Wyoming saw no or only minimal changes in the alternative measures from 2007 to 2008 (see Table 1). The U-1, U-4, and U-5 annual average rates were unchanged and the U-2, U-3, and U-6 only added 0.1% from 2007 to 2008 (see Table 2). In contrast the U.S. alternative measures rose by 0.6% for U-1, 0.8% for U-2, 1.2% for U-3 and U-4, 1.3% for U-5 and 2.2% for U-6.

The measures started to change from 2008 to 2009, when all alternative measures increased. The largest rise was in the U-6 (5.6%) and the smallest in the U-1 (1.7%). All measures but the U-2 continued to increase in 2010, though at a much slower pace. The largest increase occurred in the long-term unemployed (U-1) with 0.8%.

Starting in 2011, annual averages decreased in all alternative measures. The largest decreases were in the U-4, U-5, and U-6, each with 0.9%, and the smallest in the U-1, with 0.6%. The decline continued through 2012 although at a slower pace. Because all measures decreased it cannot be assumed that the unemployment rate for U-3 decreased because of an increase in discouraged workers. Individual states do not have the individual components to calculate the rates.

The difference between the U-3 and the U-4 is the number of discouraged workers (see Definitions). The larger the difference, the more discouraged workers there are in the labor market. In 2007 and 2008 this difference was very small, 0.1% and 0.0% respectively. In 2009 the difference increased to 0.3% and continued that trend in 2010 when it increased to 0.5%. In 2011, the gap started to close again and continued to do so in 2012 (see Table 3). Compared to the nation, Wyoming has a low number of discouraged workers. States with high unemployment rates tend to have a much higher number of discouraged workers. For example, Florida and Nevada had gaps of 1.0% and 0.8%, respectively, in 2010. In 2012 that gap was still 0.9% for both states.

The difference between the U-5 and U-6 provides insight as to how many people involuntarily work part-time jobs. This number also increased from 2007 to 2009 and started to decline but it has not reached its pre-recession level (see Table 3). The U-6 rate increased the most of any rate in 2009 (5.6%; see Table 2). The U-6 also is farther from its pre-recession level than any other alternative measure.

In conclusion, the alternative measures have all improved from their pre-recession high. Some of the alternative measures indicate that even though the unemployment rate has decreased significantly since its high in 2010, the number of discouraged workers and the number of people working part-time jobs involuntarily is still higher than prior to the recession.

U.S. Bureau of Labor Statistics. (2013, January 25). Alternative Measures of Labor Underutilization for States, 2012 Annual Averages. Retrieved March 27, 2013, from http://www.bls.gov/lau/stalt.htm