Underemployment hasn’t improved since February and is barely down over the last year, according to new statistics released by the Bureau of Labor Statistics Friday.
The U-6 unemployment rate, which measures underemployment by looking at workers who have been forced into part-time work or who are only sporadically looking for work in addition to those who can’t find jobs, was 9.7 percent in September, the same as in February and down only slightly from 10 percent in September of last year.
Prior to the past year, underemployment had steadily declined since exploding during the financial crisis.
In the previous five Septembers, dating to when the jobs recovery began, the underemployment rate fell by an average of 1.36 percentage points each year, down from nearly 17 percent of the labor force.
While a flattening underemployment rate is bad news, there is room for encouragement from Friday’s report. The official calculations of unemployment and underemployment have been propped up because of an influx of people who had fallen out of the labor force rejoining the job hunt. Because the Census Bureau only counts people as unemployed if they are actively looking for a job, it raises the unemployment rate if people who had quit the job search begin looking for jobs again, as appears to be happening.
In fact, labor force participation has risen from 62.4 percent last September to 62.9 percent this year, an increase of over 3 million people. That increase came even though the long-term trend is toward lower participation because of the aging population.
Overall, employment has risen from 59.3 percent of the population in September of last year to 59.8 percent this September, also an increase of over 3 million.
Federal Reserve Chairwoman Janet Yellen has said the unemployment rate is the single most important indicator of the health of the labor market and also given credence to the U6 underemployment rate, but she has also said there is a silver lining in the recent slowdown. At a press conference in September, she suggested that the unemployment rate has hovered around 4.9 percent in part because of people re-joining the job search and entering the calculation for the unemployment rate. The Fed, she said, could afford to keep rates low for a while to draw more workers back into jobs and give the recovery “room to run.”
