Alternative Measures of Labor Underutilization for States

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Alternative Measures of Labor Underutilization for States, 2012 Annual Averages

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.

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BLS is committed to updating the alternative measures data for states on a 4-quarter moving-average basis. The analysis that follows pertains to the 2012 annual averages. Data are also available for prior
time periods back to 2003 .

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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

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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 of the other five measures. As a result, these U-3 measures may differ from the official state unemployment rates for the same period. The official rates are 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 2012 will be released on March 1, 2013.

Alternative measures of labor underutilization by state, 2012 annual averages

(percent) Measure State United States Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico U-1 4.5 4.6 3.1 3.9 3.4 6.2 4.2 5.3 4.2 6.1 5.4 5.4 3.3 3.6 5.3 3.9 2.3 2.6 3.9 3.9 3.9 3.9 3.7 5.2 2.7 5.0 3.5 2.6 1.7 6.4 2.9 5.9 3.9 U-2 4.4 4.5 4.1 4.0 3.6 5.8 4.5 5.2 4.3 4.3 4.9 4.4 3.2 3.2 4.9 4.6 2.6 2.8 4.3 3.0 4.4 3.8 3.9 5.0 3.1 4.4 4.1 3.1 1.9 6.3 3.3 5.9 3.4 U-3 8.1 8.0 7.4 8.2 7.6 10.4 8.1 8.4 7.2 9.0 8.4 9.1 6.0 7.1 8.7 8.3 5.1 5.6 8.0 7.1 7.7 7.0 6.7 9.1 5.8 8.9 6.9 6.1 4.0 11.0 5.6 9.5 7.1 U-4 8.6 8.6 8.1 8.8 7.9 11.1 8.4 9.0 7.7 9.5 9.3 9.9 6.4 7.4 9.3 8.6 5.3 5.9 8.4 7.6 8.0 7.6 7.2 9.8 6.0 9.4 7.3 6.4 4.3 11.9 6.0 10.1 7.5 U-5 9.5 9.6 8.9 9.8 8.9 12.2 9.3 9.8 8.7 10.7 10.1 10.7 7.5 8.3 10.0 9.3 6.1 6.7 9.2 8.5 9.3 8.5 7.9 11.0 6.9 11.1 8.0 7.0 4.7 13.3 6.7 11.0 8.8 U-6 14.7 13.5 13.0 15.9 13.0 19.3 14.6 14.7 13.9 14.1 16.0 15.7 12.8 14.0 16.0 14.2 10.0 10.2 13.8 11.9 15.0 12.1 12.9 16.6 11.7 15.1 12.5 13.7 8.8 20.3 11.2 15.7 14.1

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Measure State New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Substate areas Los Angeles County New York City 6.4 6.6 5.8 5.5 10.9 9.4 11.5 10.3 12.6 11.4 20.8 15.8 U-1 5.5 5.7 1.0 3.7 2.2 4.2 4.3 6.3 5.4 1.4 4.2 3.3 2.7 2.1 3.2 4.3 3.9 3.5 2.1 U-2 5.0 5.0 1.5 3.8 2.9 5.1 4.7 6.6 4.9 2.0 4.4 3.3 3.0 2.9 2.8 4.7 4.1 4.0 2.5 U-3 8.7 9.2 3.2 7.2 5.1 8.9 7.8 10.5 9.4 4.6 7.8 6.7 5.8 5.1 6.0 8.3 7.4 7.1 5.5 U-4 9.3 9.6 3.4 7.7 5.4 9.1 8.3 10.9 10.1 4.9 8.4 7.1 6.2 5.4 6.5 8.7 7.9 7.5 5.7 U-5 10.3 10.7 3.9 8.6 6.3 10.1 9.2 11.8 11.2 5.5 9.1 7.8 6.8 6.3 7.3 10.1 8.5 8.4 6.4 U-6 14.9 16.3 6.1 13.6 9.6 17.2 13.9 17.6 15.8 8.5 13.3 12.1 11.2 11.0 11.7 16.9 13.1 13.1 10.0

In 2012, Nevada reported the highest rate for 5 of the 6 alternative measures of labor underutilization. Nevadas rates ranged from a U-2 of 6.3 percent, the second-highest U-2 rate among states, to a U-6 of 20.3 percent, including a CPS-based unemployment rate, U-3, of 11.0 percent. Rhode Island reported the highest U-2 rate, 6.6 percent. For U-1 and U-3 through U-6, the next highest rates were recorded in California and Rhode Island, including U-3 rates of 10.4 and 10.5 percent, respectively. North Dakota continued to record the lowest rates for all six measures. North Dakotas rates ranged from a U-1 of 1.0 percent to a U-6 of 6.1 percent, including a U-3 of 3.2 percent. Nebraska and South Dakota had the next lowest rates for U-1 through U-6, though not in the same order for each measure, including U-3 rates of 4.0 and 4.6 percent, respectively. The next lowest U-3 rates were registered in Iowa, Oklahoma, and Vermont, each at 5.1 percent. These states also had among the lowest rates for all of the other alternative measures in 2012. 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, 18 states and the District of Columbia, as well as the nation as a whole, had U-1 measures that exceeded their U-2 rates in 2012. The largest of these gaps was reported in the District of Columbia (-1.8 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, U-1 and U-2 were 4.5 and 4.4 percent, respectively, in 2012, while the two measures were both at 5.3 percent a year earlier. Florida and Nevada 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 states are a reflection of their relatively high degrees of would-be job-seeker discouragement. In contrast, five statesIowa, Minnesota, North Dakota, Oregon, and Wyominghad gaps between their U-3 and U-4 rates of only +0.2 percentage point each, indicating relatively low

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incidences of discouragement. The U-3 rates for these five states range from 3.2 percent in North Dakota to 8.9 percent in Oregon. 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 and Oregon posted the largest gaps between their U-5 and U-6 rates, +7.1 percentage points each, followed by Nevada, +7.0 points. North Dakota registered the smallest difference between its U-5 and U-6 measures, +2.2 percentage points, indicating a comparatively low degree of underemployment. Overall, states experienced more declines than increases in the alternative measures relative to the prior 4-quarter average period, reflecting the continuing improvement in the national labor market. Twenty-eight states and the District of Columbia 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 Nevada (-0.8 percentage point). The measure with the most states registering decreases was U-5, where 40 states and the District of Columbia posted declines; the largest of these occurred in Nevada (-1.0 percentage point). Nevada also posted the largest declines in the remaining measures, with the exception of U-6, for which it recorded a slightly smaller decline (-1.1 percentage points) than Idaho (-1.3 points). The U-1 and U-2 measures increased in 10 states each, the largest number of increases among the alternative measures relative to the four quarters ending in September 2012. At the other extreme, U-4 and U-5 increased in only six states each. Connecticut, Delaware, and Utah were the only states to experience over-the-quarter increases greater than 0.1 percentage point in any of the six alternative measures. The largest increases recorded for each measure were: U-1, Connecticut and Utah (+0.2 percentage point each); U-2, Delaware (+0.2 point); U-3, Utah (+0.3 point); U-4 and U-5, Utah (+0.4 point for each measure); and U-6, Delaware (+0.3 point). Declines relative to calendar year 2011 were even more prevalent than declines relative to the prior 4-quarter average period. Forty states and the District of Columbia reported declines in all six alternative measures over the year. The measures with the most decreases were U-5 and U-6, with 47 states and the District of Columbia showing improvements in these two measures over the year. The largest U-6 decline occurred in Alabama (-2.7 percentage points), followed by Nevada and South Carolina (-2.4 points each); the largest U-5 declines occurred in Nevada (-2.2 points) and Alabama (-2.0 points). U-1 registered the greatest number of increases among measures over the year, with four states posting increases. The largest of these increases occurred in the New York (+0.5 percentage point). New York was the only state not to experience a decline in any of the six alternative measures of labor underutilization over the year. Many states with extreme measures, either high or low, maintained their general place in the rankings of alternative measures over the year. California, Nevada, North Carolina, and Rhode Island had rates among the 10 highest for each measure in both 2012 and 2011. Similarly, Iowa, Nebraska, North Dakota, Oklahoma, South Dakota, Vermont, and Wyoming had rates among the 10 lowest for each measure in both years. These same seven low-rate states were also in the lowest 10 for each measure in 2010. 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.

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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 2013, is tentatively scheduled for Friday, April 26, 2013.

Last Modified Date: January 25, 2013

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