Many people are familiar with the two types of unemployment reported by the U.S. Bureau of Labor Statistics (BLS) each month: U3 and U6. U3 is the one most commonly hyped by the media. It represents the number of people actively seeking jobs, but only in the last four weeks.
The U6 rate expands the range of the unemployed with three categories of individuals: underemployed, marginally attached or discouraged workers. Underemployed people are part-time workers who want full-time jobs. Marginally attached are those who have looked for work in the last year, but not during the previous four weeks. Discouraged workers are marginally attached people who have given up looking for work because they have gone back to school, are pregnant or became disabled. Based on their circumstances, they may or may not return to the labor force.
By including everyone on the fringes of the labor market, the U6 rate offers a broader perspective into the underutilization of the country’s workforce. For this reason, many economists consider U6 the “true unemployment rate.” In fact, Former Federal Reserve Chair Janet Yellen has said U6 paints a clearer picture of actual U.S. unemployment.
It’s important to revisit these categories and what they mean because for employers facing a shortage of qualified candidates, there may be large pockets of available workers tucked away among the underemployed, the marginally attached or discouraged workers who can fill open positions.
With three additional categories of unemployed people, U6 historically is about double the U3 rate. For example, in January 2019, the seasonally adjusted U3 rate was 4.0%, while U6 was 8.1%. But how does that translate into numbers of workers? According to BLS figures from February, U3 accounted for about 6.2 million unemployed workers (3.8%); U6 was 11.9 million workers (7.3%). The difference is approximately 5.7 million workers across the country. That’s a really big number of potentially available workers.
The underemployed and marginally attached represent the most promise as an untapped labor force, an opportunity for employers to transition many of them to full-time work. Likewise, the marginally attached are looking for work but simply may not have done so in the last four weeks, per the BLS criteria. Both of these categories of workers are currently in the workforce. They need to be considered.
Let’s recognize that accessing U6 workers already may be happening. The 2018 average annual U6 rate was 7.7%. By February, though, the seasonally adjusted rate dropped to 7.3%. This number accounts for the sharp increase of unemployed workers as a result of the government shutdown, followed by their return to work. Bottom line, the numbers of both underemployed and marginally attached workers decreased significantly from the end of 2018 to February.
So, if there is a large pool of people looking for work, how do you access them? Good question. Here are four tips to consider:
1. Be more proactive: Employers already are more aggressive in “poaching” candidates from other companies to fill their own positions. It’s time to turn that focus to mining underemployed and marginally attached workers. This becomes an exercise in better communicating open positions through web-based messaging and job listings, networking to meet prospects, activating your social media channels to help source people who may be good candidates and deeper online research using online platforms to see who’s out there.
2. Change your mindset: Employers need to begin looking toward the possibilities of other workforce options. If there is a shortage of workers, then being more open to candidates who appear to have suitable skills but may require some upskilling may be the answer. With the current workforce shortage across the country, employers will need to continue to be more flexible and less stringent in their job requirements. Frankly, they may need to take more chances.
3. Partner with local trade schools or colleges: The lack of skilled workers has become so critical in certain industries that some employers have partnered with local trade schools as well as two- and four-year colleges to source talent. These partnerships can pay great dividends. To a large extent, though, employers reap what they put into the relationship. The most effective partnerships involve joint curriculum development, equipment donations and committed, regular training programs.
4. Try something new: Many employers already dabble in using geo-targeted search engine marketing (SEM), social media marketing and online advertising to laser-target candidates who are looking. Consider adding these digital strategies to your toolkit.
The U6 rate reveals both the reality of underutilization of labor in this country as well as a huge opportunity to find full-time workers for employers who face a critical shortage of candidates. It’s time to be creative and track them down, because they’re out there.
