Broader U-6 rate at 17%: the long-term unemployed and the dark side of jobs report

From Phil Izzo of The Wall Street Journal on Nov. 5:

The U.S. jobless rate was flat at 9.6% in October, but the government’s broader measure of unemployment dropped slightly to 17%, possibly due to long-term unemployed dropping out of the labor force.

The comprehensive gauge of labor underutilization, known as the “U-6″ for its data classification by the Labor Department, accounts for people who have stopped looking for work or who can’t find full-time jobs.

The key to the decrease in the broader unemployment rate was due to a 318,000 drop in the number of people employed part time but who would prefer full-time work. That drop reversed part of last month’s big 612,000 jump. Meanwhile, the number of discouraged workers and those who classify themselves as “marginally attached” to the labor force also increased.

The broader rate decreased despite a decline of 330,000 in the number of people who are employed. That drop may sound strange considering the Labor Department reported the economy added 151,000 jobs in October. It’s important to remember that the unemployment rate and jobs numbers are calculated using separate surveys, and the often move in differing directions. The household survey, which is used to calculate the unemployment rate, also is much more volatile, covering a substantially smaller percentage of the work force. And some of this month’s weakness may be the result of earlier strength that stood in opposition to declines seen in payroll data.

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