IWS Documented News Service

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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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Alternative Measures of Labor Underutilization for States, 2011 Annual Averages [27 January 2012]
http://www.bls.gov/lau/stalt.htm

Six alternative measures of labor underutilization have long been available on a monthly basis from the Current Population Survey (CPS) for the United States as a whole. They are published in the Bureau of Labor Statistics' monthly Employment Situation news release. (See table 15.) The official concept of unemployment (as measured in the CPS 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.

BLS is committed to updating these data on a 4-quarter moving-average basis. The analysis that follows pertains to the 2011 annual averages. Data are also available for the following prior time periods:

• Fourth quarter of 2010 through third quarter of 2011
• Third quarter of 2010 through second quarter of 2011
• Second quarter of 2010 through first quarter of 2011
• 2010 annual averages
• Fourth quarter of 2009 through third quarter of 2010
• Third quarter of 2009 through second quarter of 2010
• Second quarter of 2009 through first quarter of 2010
• 2009 annual averages
• Fourth quarter of 2008 through third quarter of 2009
• Third quarter of 2008 through second quarter of 2009
• Second quarter of 2008 through first quarter of 2009
• 2008 annual averages
• 2007 annual averages
• 2006 annual averages
• 2005 annual averages
• 2004 annual averages
• 2003 annual averages

The six state measures are based on the same definitions as those published for the United States:

• 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 (this is the definition used for the official unemployment rate);
• 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; and
• 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.

Definitions for the economic characteristics underlying the three broader measures of labor underutilization are worth mentioning here. Discouraged workers (U-4, U-5, and U-6 measures) are persons who are not in the labor force, want and are available for work, and had looked for a job sometime in the prior 12 months. They are not counted as unemployed because they had not searched for work in the prior 4 weeks, for the specific reason that they believed no jobs were available for them. The marginally attached (U-5 and U-6 measures) are a group that includes discouraged workers. The criteria for the marginally attached are the same as for discouraged workers, with the exception that any reason could have been cited for the lack of job search in the prior 4 weeks. Persons employed part time for economic reasons (U-6 measure) are those working less than 35 hours per week who want to work full time, are available to do so, and gave an economic reason (their hours had been cut back or they were unable to find a full-time job) for working part time. These individuals are sometimes referred to as involuntary part-time workers.

Generally, all six measures of labor underutilization move together over time, including across business cycles. Similarly, states that have high unemployment rates tend to have high values for the other five measures; the reverse is true for states with low unemployment rates. Note that, in the table and in the comparisons below, the unemployment rates (U-3) that are shown are derived directly from the CPS, because this is the only source of data for the various components. As a result, these U-3 measures may differ from the official state unemployment rates for the same period. The latter are estimates developed from statistical models that greatly improve the reliability of the top-side labor force and unemployment estimates. Those models, developed by the Local Area Unemployment Statistics (LAUS) program, incorporate CPS estimates, as well as input data from other sources. The model-based estimates are accessible through the LAUS program homepage. The official model-based annual averages for 2011 will be released on February 29, 2012.

In 2011, Nevada again reported the highest rate for all six alternative measures of labor underutilization. Nevada’s rates ranged from a U-2 of 8.5 percent to a U-6 of 22.7 percent, including a CPS-based unemployment rate, U-3, of 13.1 percent. California had the second highest rate for all six measures, including a U-3 of 11.6 percent. The next highest U-3 rate, 11.1 percent, was recorded in Rhode Island, which also had among the highest rates for each of the other alternative measures.

North Dakota continued to record the lowest rates for all six measures. North Dakota’s rates ranged from a U-1 of 1.2 percent to a U-6 of 6.6 percent, including a U-3 of 3.6 percent. Nebraska and South Dakota had the next lowest U-3 rates, 4.5 and 4.9 percent, respectively, and also ranked among the lowest states for the remaining measures. Four other states had U-3 values of less than 6.0 percent in 2011: New Hampshire, 5.4 percent; Iowa and Vermont, 5.8 percent each; and Wyoming, 5.9 percent. These states also had among the lowest rates for all of the other alternative measures.

In general, the alternative measures in any given state increase from U-1 to U-6, as they normally do at the national level. However, many states continued to have U-1 measures that exceeded their U-2 rates. This was the case in 18 states and the District of Columbia for 2011. The largest of these gaps was noted in the District of Columbia (-1.7 percentage points). As the economic recovery continues, consistent job growth results in declining U-2 rates and a narrowing of the gap between the two measures. At the national level, both U-1 and U-2 were 5.3 percent in 2011, as the gap has narrowed since early 2010.

Nevada, Michigan, New York, and South Carolina had the largest gaps between their U-3 and U-4 rates, +0.9 percentage point each. The conceptual difference between U-3 and U-4 is that the latter includes discouraged workers. Thus, the large gaps for these four states are a reflection of their relatively high degrees of would-be job-seeker discouragement. In contrast, North Dakota had the smallest gap between its U-3 and U-4 rates, +0.1 percentage point, indicating a relatively low incidence of discouragement.

In addition to the marginally attached, who are included in U-5, involuntary part-time workers are included in U-6. The larger the difference between U-5 and U-6, the higher the incidence of this form of "underemployment." California posted the largest gap between its U-5 and U-6 rates, +7.7 percentage points, followed by Nevada, +7.2 points. North Dakota registered the smallest difference between its U-5 and U-6 measures, +2.4 percentage points, indicating a comparatively low degree of underemployment.

The largest range across U-1 and U-6 among states was posted by California, +14.1 percentage points, followed closely by Nevada, +14.0 points. The next largest spreads were reported in Michigan and Washington, +12.7 percentage points each. North Dakota had the smallest range across its alternative measures, +5.4 percentage points. In general, states with lower U-3 rates had narrower ranges across their measures.

Overall, states experienced more declines than increases in the alternative measures relative to the prior 4-quarter average period, reflecting the moderate improvement in the national labor market. Thirty-four states showed improvement in U-1, the measure with the fewest number of declines relative to the prior period; the largest U-1 improvement occurred in Georgia (-0.6 percentage point). The measure with the most states registering decreases was U-6, where 39 states posted declines; the largest of these occurred in Utah (-1.0 percentage point). Utah posted the largest declines in the remaining measures, ranging from 0.5 percentage point in U-2 (tied with Georgia) to 0.9 point in U-5.

The U-1 measure increased in the greatest number of states, 10, plus the District of Columbia; U-4, at the other extreme, increased in only 4 states and the District of Columbia. The largest over-the-quarter increases recorded were: U-1, Arkansas and Hawaii (+0.2 percentage point each); U-2, Rhode Island (+0.2 point); U-3, the District of Columbia, Hawaii, Illinois, Indiana, Nebraska, and Rhode Island (+0.2 point each); U-4, the District of Columbia and Indiana (+0.3 point each); U-5, the District of Columbia (+0.4 point); and U-6, Nebraska (+0.5 point).

Declines relative to calendar year 2010 were even more prevalent than declines relative to the prior 4-quarter average period. The measure posting the most decreases was U-2, where 49 states showed improvement over the year. The largest of these declines occurred in Oregon (-2.0 percentage points). U-6 registered the greatest number of increases among measures over the year, with six states and the District of Columbia posting increases. The largest of these increases occurred in the District of Columbia (+1.8 percentage points).

Many states with extreme measures, either high or low, maintained their general place in the rankings of alternative measures over the year. California, Florida, Nevada, Rhode Island, and South Carolina had rates among the 10 highest for each measure in both 2011 and 2010. Similarly, Iowa, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Vermont, and Wyoming had rates among the 10 lowest for each measure in both years.

The alternative measures for states are analyzed on a 4-quarter average basis in order to increase the reliability of the CPS estimates, which are based on relatively small sample sizes at the state level, and to eliminate seasonality. Due to the inclusion of lagged quarters, the state alternative measures may not fully reflect the current status of the labor market.

For additional information on state estimates derived directly from the CPS, see notes on subnational CPS data.

Note: Some state rankings cited above include ties. Data are calculated from quarterly tables in which the components of each measure are rounded to the nearest hundred. As a result, these measures contain slightly more rounding error than that found in typical CPS annual average tabulations (in which rates are calculated based on unrounded data). Due to small state sample sizes, neither monthly nor quarterly state data from the CPS satisfy BLS publication standards.

The next issuance of the alternative measures of labor underutilization for states, covering the four quarters ending in March 2012, is tentatively scheduled for Friday, April 27.

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