To get a broader view of the U.S. labor market than you would from the official unemployment rate, take a look at this alternative measure produced by the U.S. government’s Bureau of Labor Statistics. Known as the U-6 unemployment rate, it takes into account not just those formally unemployed but also the underemployed and those marginally attached to the workforce. These latter groups include those working part-time because they can’t find full-time employment, those who would like to work but have given up looking, and those who have temporarily dropped out of the labor force for some personal reason.
As the chart above shows, this broad measure also shows unemployment and underemployment falling, as is the case with the official unemployment rate, but from much higher levels. U-6 unemployment peaked at 17.1% in the fall of 2009. Even now it is only down to 13.7%. That is only three-quarters the rate of decline seen in the official unemployment rate, which has fallen from its peak of 10% to 7.3%.
This provides part of the explanation of why, in a consumption-driven economy like the U.S., the pace of recovery of the economy as a whole continues to be so modest so far into the recovery. There is still a long way to go before the U.S. is back to anything remotely like full employment.
The chart above also provides a dramatic illustration of the havoc the 2008 financial crisis wreaked on the real economy. The magnitude of un- and underemployment — and the rapidity with which it rose in the Great Recession — was unlike anything experienced in the two decades for which the Bureau of Labor Statistics provides U-6 data. It is sobering to see that though the broad measure of unemployment is at its lowest point in this recovery it is still a third higher than it was at its worst in the recession that followed the dotcom bubble bursting in the early 2000s.