An increasingly service-oriented and part-time economy has opened a possibly enduring gap between the conventional unemployment rate and broader measures of unemployment, says Morningstar's Bob Johnson.
Bob Johnson: This week's chart focuses on two different measures of the unemployment rate, the U-3 and the U-6.
The U-3 is a more conventional measure of unemployment that's in the papers each and every month. It includes only those people who have looked for a job in the last month. People who are working part time but would rather have a full-time job--the so-called underemployed--are not considered unemployed in the U-3.
The U-6 measure, on the other hand, is a much broader and less talked about metric, and it includes the people who are looking for a job but haven't actually looked in the last 30 days. It also includes the people who are in part-time work but would rather have a full-time job. The U-6 unemployment rate, runs quite a bit higher than the U-3 conventionally reported unemployment rate.
At the moment, the U-6--the more broad measure--shows unemployment at more than 10%, while the conventional unemployment rate is reported at 5.1%. The normal gap between these two unemployment rates is about 4%. So, we're running a little bit above average right now, but not near the 10% disaster level that a lot of people are scared of. It's a gap that could be a little bit lower, but I don't think it will go a lot lower over time, because more and more of the economy is service-oriented and is part-time work. So, we may never get back to the all-time lows of a gap that looked more like 3%, but we could get back to 4% or 4.5% as the economic recovery continues.
