The U.S. Bureau of Labor Statistics on Friday will release the monthly Employment Situation report, which is the benchmark for the headline unemployment rate. Headline, or U-3, unemployment is a measure of how many members of the workforce — defined by the BLS as the set of Americans who are both eligible and willing to work — are actively seeking employment. In June, this was 11.8 million people, or 7.6 percent of the American labor force.
The headline unemployment rate can be misleading, and it often paints a rosier picture of labor market conditions than is called for. The headline rate doesn’t include marginally attached or discouraged workers — those who are underemployed and those who have given up on searching for a job. What’s more, the headline unemployment rate is sensitive to changes in the labor force participation rate, or the share of all adults who are willing and able to work, be they already employed or looking.
As of June, the labor force participation rate was 63.5 percent, substantially lower than its pre-crisis level of about 66 percent. This reduction in the labor force participation rate has helped reduce the headline unemployment rate without actually raising the overall level of employment or improving the health of the labor market.
Because the headline unemployment rate offers an incomplete picture of the labor market, observers often turn to alternative metrics. One popular alternative is the U-6 unemployment rate, which counts not just those job seekers included in the U-3 (headline) rate, but also those who are marginally attached to the workforce (underemployed) and people working part-time for economic reasons. This measure of unemployment hit 14.3 percent in June, half a percentage point increase from May but down from a peak of 17.1 percent in April 2010.
Another metric is the payroll-to-population ratio, which is a measure of the percentage of the total adult population that is employed full time. Gallup has been tracking this metric since at least 2011. In its August 1 report, Gallup reported that its P2P ratio remained relatively unchanged on the month at 44.8 percent in July and also nearly unchanged from the 45 percent rate recorded in the year-ago period.
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