How do government statistics agencies like the Bureau of Labor Statistics define the unemployment rate (U3)? Explain the weaknesses of U3 as a measure of labor market distress and compare it with the U6 measure. What type of labor market distress does U6 fail to capture?
Unemployment rate is one of the prime economic indicators . There are 6 such rates named U1 to U6 . U3 is officially recognized rate of unemployment . It is simplistic in nature . It is calculated by finding number of unemployed people as a percentage of total labour force .
Some inherent weaknesses of U3 are that it does not account for people who are actively searching for jobs but haven't got one yet . It does not include part time workers . A discouraged worker in the middle of a recession is not included .
On the other hand U6 encompasses all such categories of people . Marginally attached workers , workers doing part time jobs etc are all included here .
U6 fails to capture the section of workers whose technical know-how and education is more valuable than their current employment .
Get Answers For Free
Most questions answered within 1 hours.