Rhode Island’s unemployment rate may be the highest in the nation at 8.3 percent, but a lesser-known metric ranks the state sixth highest – and lends insight into the state’s condition, local economists say.
That 8.3 percent rate is the standard monthly unemployment rate, known as Unemployment 3, or U-3, one of six metrics used by the U.S. Bureau of Labor Statistics. The so-called U-6 rate, measured quarterly and annually as opposed to monthly, counts populations not typically counted in the standard measure: discouraged workers, marginalized workers and part-timers who would prefer to be working full time, said R.I. Department of Labor and Training Assistant Director Donna Murray.
It’s not the case that the U-6 measurement is any more “real” than the standard unemployment rate, says Leonard Lardaro, an economist with the University of Rhode Island.
“You have to look at what is not counted: discouraged workers, people who have given up searching,” he said. “U-3 assumes if you’re physically able to work but you’re not actually seeking work, then you’re not both willing and able to work, so you’re not counted.”
Instead, says Lardaro, both the U-3 and the U-6 are “statistical glimpses that do different things, and neither is perfect.”
While the U-3 has been the standard because it is simpler to use, Lardaro says, the U-6, which also has been calculated for years, has begun to surface in the news as economists look for deeper insights into the nation’s and individual states’ economic conditions.
“We never had to use [U-6] because we never had any recession as bad as the last one,” Lardaro said. “We had high unemployment rates, but not like this.”
A state’s U-6 is typically higher than its U-3, but the measures move together, so the gap between them shrinks when the economy improves, but increases when the economy slows, said Edinaldo Tebaldi, an associate professor of economics at Bryant University.
In April, The New York Times reported that Dennis Lockhart, the Federal Reserve Bank of Atlanta president, said that tracking U-6 could help explain whether the economy is on a path to recovery. Lockhart indicated that he would be encouraged if the gap between national U-6 and U-3 drops back to the range of 3-4 percentage points it was at before the recession, instead of the 6 point range it is in now.