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Measures of Labor Underutilization from the Current Population Survey

Steven E. Haugen


The Current Population Survey (CPS) has been the source of official labor force statistics for the U.S. since its inception in March 1940. The best-known statistic calculated from CPS data is the unemployment rate. To be classified as unemployed, a person must have had no employment during the survey reference week, been available for work, and made specific efforts to find employment during the 4-week period ending with the reference week. The unemployment rate represents the number unemployed as a percent of the labor force. The unemployment rate has proven to be a reliable indicator of overall labor market conditions and has performed quite well as a business cycle indicator. That does not mean, however, that everyone has been completely satisfied with the official figures. As a result, in the 1970s, a range of unemployment indicators known as U-1 through U-7 was introduced. In 1994, a redesigned CPS was fielded, and some of the survey changes affected series used as inputs in several of the U-1 to U-7 measures. Consequently, BLS introduced a new set of “U’s“ in 1995. The new U-1 to U-6 range of alternative measures of labor underutilization offered an updated set of indicators that took advantage of newly collected information in the redesigned survey. This paper summarizes the rationale for the original and current ranges of alternative indicators. The paper also concludes that while the five alternatives to the official unemployment rate in the current U-1 to U-6 range may represent varying views of labor resource underutilization, they show very similar patterns of change across the course of the business cycle.