Idaho’s Alternative Measures of Unemployment Show Significant Improvement in 2016

While the number of unemployed Idahoans has steadily declined since May 2009, jobless rates for broader definitions of unemployed – such as discouraged, underemployed and marginally attached workers – improved significantly in 2016.

The U.S. Bureau of Labor Statistics (BLS) identifies six measures, or categories, of unemployment rates based on varying components of the labor force – U-1, U-2, U-3, U-4, U-5 and U-6. (See Figure 1 for definitions.) In Idaho, the official unemployment rate falls into the U-3 category.

Idaho’s broadest measure, U-6, improved to No. 12 in the nation in 2016, three spots better than last year and 23 spots better than the No.35 ranking in 2009 as the nation was coming out of the Great Recession. The U-6 rate is the broadest formal measure of labor underutilization – or underemployment – the BLS reports. It’s determined by the total number of unemployed persons, plus all marginally attached workers, plus the total number of workers who are employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers, Many economists use this definition as the most statistically reliable measure because it uses the most robust protocols for sampling and data collection.

Over the past six years Idaho has been among the national leaders in job creation driving official monthly unemployment rates (U-3) well below 4 percent. Delving deeper and evaluating Idaho’s formal measures of the underemployed, U-4 through U-6, Idaho has shown  improvements with continuing lower unemployment rates well below the national averages in the most recently published data for 2016 (Figure 2).

However, even with the continual improvement analysts argue the levels of discouraged workers captured in the U-6 definition, who are not fully reaping the benefits of the thriving economy, have yet to return to all-time historical lows. According to these metrics there is around an additional 4 percent of the labor force who are still marginally attached workers who are employed only part time for economic reasons, not presently looking for work but are available to work or are discouraged and feel there is a job out there for them (difference between the U-3 and U-6 rates).  Some analysts counter that perspective, arguing the record levels of the recent expansion were achieved because the unprecedented growth and prosperity was built on an artificial economic foundation and so returning to such levels is unsustainable. The jury’s still out and the economic data in the coming two years will begin to paint a clearer picture.

Also it is important to note the overall improvement in all these measures point to a further tightening labor market, where most job seekers who want a job can find a job, and employers are challenged with finding and maintaining a skilled workforce. This means a more skilled workforce and especially a better alignment between the skills the workforce possesses and the skills employer’s demand, is vital to Idaho’s competitiveness in the global economy and ultimate wealth creation for Idaho workers.

While increasing Idaho’s competitiveness requires a multi-tiered approach (government, education, private sector, etc.) the Idaho Department of Labor has many tools to encourage competitiveness. Idaho’s Workforce Development Training Fund is an economic development instrument the department uses to invest in Idaho’s talent to meet these short-term training demands of employers. Also the department’s Career Information System and its new JobScape application arm both the young and old with tools to plan, prepare and compete for the jobs of the future.

The most recent data updated to the first quarter of 2017 along with more detailed definitions and historical data on the unemployed are produced by the BLS and can be found here under the title “Alternative Measures of Labor Underutilization for States.”

Details about these Measures:

The official concept of unemployment (as measured in the Current Population Survey by U-3 in the U-1 to U-6 range of alternatives) includes all jobless persons who are available to take a job and have actively sought work in the past four weeks. This concept has been thoroughly reviewed and validated since the inception of the CPS in 1940. The other measures are provided to data users and analysts who want more narrowly (U-1 and U-2) or broadly (U-4 through U-6) defined measures.  The U-4, U-5 and U-6 are a statistical foundation for beginning to quantify the underemployed, see formal definitions below. When deconstructing the components of the U-4, U-5 and U-6 you start to capture those working but not necessarily at their skill level or the hours they desire, to mention a few.

Research and Analysis Bureau
Communications and Research Division
Idaho Department of Labor
LMI@labor.idaho.gov

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