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U-6: The Jobs Nightmare U-6: The Jobs Nightmare

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Magazine / POLITICS

U-6: The Jobs Nightmare

U-6 is a labor statistic that more vividly captures the level of economic dislocation during a recession like this one.

October 17, 2009

What if someone told you that 17 percent of American adults -- one out of every six civilians -- is unemployed, working part-time but seeking a full-time job, or would like to be employed but has given up the search? That would make the current 9.8 percent unemployment number pale in comparison, right? It also might really get your attention if you were the party in control of the White House and Congress.

For those who think that "U-6" is Bono's band with an enhanced orchestral backup, take a look at the accompanying chart showing one set of figures for "alternative measures of labor underutilization," published by the Labor Department's Bureau of Labor Statistics. Although the widely watched unemployment figure, known to the numbers crunchers as U-3, gets all the press each month, the same BLS release contains several other measures, including U-6, a figure that more vividly captures the level of economic dislocation during a recession like this one. The U-6 total includes the unemployed who are looking for work, the unemployed who have temporarily quit searching, the underemployed, and the "marginally attached" workers who have other reasons for not pursuing a job right now.

People with graduate degrees who work part-time at Starbucks mainly for the health care benefits don't show up in the traditional unemployment figures. They show up in the U-6 count.

 

It's difficult to look at that U-6 chart and not feel a bit sick. The upward trend began in December 2007 when the figure stood at 8.7 percent; the rate then jumped from 11.2 percent in September 2008 to 17 percent in the most recent September figures. This surge almost precisely mirrors the better-known, though lower, U-3 numbers.

Although there are divergent forecasts for gross domestic product growth next year -- ranging from 2.5 percent in the Blue Chip Economic Indicators survey of more than 50 top economists, to 3 percent in the National Association for Business Economics poll of 44 professional forecasters, to the ISI Group's projection of 4 percent -- there is a convergence in the projections for next year's unemployment: All of them are bad.

The GDP optimist, ISI Group, a Wall Street economic and policy analysis firm that Institutional Investor magazine consistently rates at the top, forecasts unemployment to peak at 10 percent in the current fourth quarter and fall slightly to 9.5 percent by next year's fourth quarter, during the 2010 midterm election. It sees unemployment coming down only a bit more by the fourth quarter of 2011.

The Blue Chip survey projects that unemployment will average 10 percent for the next three quarters and improve only modestly in the second half of next year. Finally, the NABE survey forecasts that unemployment will rise to 10 percent in the first quarter of next year and edge down to 9.5 percent by the end of 2010.

With all three surveys predicting that unemployment will hover near 10 percent for the entire year preceding the midterm election, it's important to consider the historical significance of that many Americans being out of work. Just once in the past 60 years has the U-3 unemployment rate exceeded 8 percent in October or November of an election year.

That was in 1982, during President Reagan's first term, when the GOP controlled the Senate but not the House. Unemployment started moving up in October 1981, cracking 8 percent, and then climbed above 9 percent in March 1982, reached about 10 percent in September, and hit 10.8 percent in December. With joblessness rising through the fall campaign that year, Republicans lost 26 seats in the House, basically two-thirds of their gains from the previous election, when Reagan won in a 10-point landslide. With close Senate races breaking their way, Republicans didn't suffer a net loss of upper chamber seats, but they came within 60,000 votes of losing four contests and their majority.

By the 2010 midterms, unemployment will almost certainly have crested. But the prospect of a jobless rate hovering around 10 percent for a year with little noticeable decline in the months leading up to the election should keep Democrats up at night.

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