Friday, November 6, 2009

Broader U-6 Unemployment Rate Hits 17.5%

Sudeep Reddy and Phil Izzo report:

The U.S. jobless rate jumped up 0.4 percentage point to 10.2% in October, the highest level since April 1983. The government’s broader measure of unemployment shot up even more, rising half a point to 17.5%.

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. Its continuing divergence from the official rate (the “U-3″ unemployment measure) indicates the job market has a long way to go before growth in the economy translates into relief for workers.

The U-6 rate is now the highest since the Labor Department started this particular data series in 1994...

In the coming months, the U-6 measure may be an important signal for the labor market. The official jobless rate is likely to rise through at least the first half of next year as more people return to the job market. That means Americans who now fall into the U-6 category, for stopping their job searches due to discouragement, will eventually fall into the U-3 category as they restart their job hunt.

A U-6 figure that converges toward the official rate (even an official rate that’s above 10%) could indicate improving confidence in the labor market and the overall economy. But the convergence could be months away. And when it comes, it will keep unemployment above 10% for a painfully long period.

Read the full report here.

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