Undercounting the Underemployed: How Official Indicators Have Missed Millions of Underutilized Workers

The Bureau of Labor Statistics publishes six alternative indicators of labor underutilization, ranging from the long-term unemployed (U-1) and the standard unemployment rate (U-3) to a measure that includes all unemployed, involuntary part-time, and ‘marginally attached’ workers (U-6). These capture important dimensions of underutilization, but in recessions they miss millions of ‘displaced’ workers – those who are not counted in the U-6 measure but would have been working but for the economic downturn. For example, over the course of 2009 (2008:4 to 2009:4), employment fell by 5.8 million workers, but unemployed job losers and marginally attached (including discouraged) workers increased by less than 4.3 million, leaving over 1.5 million uncounted in the BLS underutilization rates. These include those who no longer qualify as ‘marginally attached’ or have simply disappeared from the data (e.g., workers returning to Mexico). If we take into account the growth in the working age population and apply a 2007 employment rate of 63%, the number of missing underutilized workers in 2009:4 increases to about 3.1 million.