New Hampshire Economic Conditions Extra — May 2009 www.nh.

gov/nhes/elmi/

New Measures of Labor Underutilization to supplement the Official Unemployment Rate

Each month New Hampshire Employment Security’s The value of this calculation, and its components, is that
Economic and Labor Market Information Bureau releases people being included have a strong attachment to work –
the official statewide unemployment rate. This is prepared either by being employed, or actively seeking a job.
in cooperation with the U.S. Bureau of Labor Statistics.
Some observers, however, think that this method has
In 2008 New Hampshire’s official annual unemployment some problems. For example, a person is counted as
rate averaged 3.8%. This measure of unemployment employed no matter how many hours a week they work.
requires very specific conditions to be met. For example, Someone who works as little as one hour per week for pay
to be in the labor force, a person needs to be employed or is considered just as employed as someone who works
unemployed. sixty hours in a week. On the other hand, someone who
has been unsuccessfully looking for a job could become so
Employed means one of the following: discouraged by the experience that they stop looking. If
a. worked for pay this happens, and they are no longer actively looking for a
b. was self-employed job, they would no longer be counted as unemployed.
c. worked 15 hours or more as unpaid workers in a
family-owned business Recognizing situations like this, the U.S. Bureau of Labor
d. was temporarily absent from a job due to vacation, Statistics has prepared alternative ways to measure
holiday, illness, etc. how labor resources – people – are being utilized in the
United States. These measures have now been prepared
Unemployed means all of the following: for all states, including New Hampshire. Five additional
a. not employed measures covering a twelve-month average are expected to
b. able and available for work be made available each quarter, in addition to the official
c. made specific efforts to find a job during the last unemployment rate each month. Each measure shows a
four weeks different aspect of unemployment or underemployment.

The civilian labor force is the sum of people who are either New Hampshire Employment Security’s Economic and
employed or unemployed. The official unemployment rate Labor Market Information Bureau expects to release these
is the unemployed as a share of the state’s civilian labor four-quarter moving averages as they become available.
force. People who are neither employed nor unemployed,
as defined above, are not in the labor force. Descriptions of these alternative measures follow.

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New Hampshire Economic Conditions Extra — May 2009 www.nh.gov/nhes/elmi/

How the Different Measures of Labor Underutilization Relate to Each Other

Marginally Attached
Workers (not in labor
force because they are
currently not working or Discouraged Workers
actively looking for work, (not in labor force - a Marginally Attached Marginally Attached
although they have within subset of Marginally Workers (including Workers (including
past 12 months) Attached Workers) Discouraged Workers) Discouraged Workers)

Unemployment
15+ weeks Unemployment -
Job Losers; Temporary
Job Completers
Unemployment less Unemployment Unemployment Unemployment Unemployment
than 15 weeks Unemployment - Job
Leavers; New Entrants

Employed
Part-time for
Economic Reasons

Civilian
Labor Force

Employment Employment Employment Employment Employment

Other Employed

Measure U-1 U-2 U-3 U-4 U-5 U-6

2008 New Hampshire 1.2% 2.1% 3.8% 4.0% 4.6% 7.8%

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New Hampshire Economic Conditions Extra — May 2009 www.nh.gov/nhes/elmi/

U-1: Persons unemployed 15 weeks or Comments: Because it counts only the long-term unemployed and calculates
longer, as a percent of the civilian labor their share of the civilian labor force, this measure will be lower than the
force calculation for the official unemployment rate. (U-3)

U-2: Job losers and persons who Comments: Measures only those persons who lost their jobs through layoff or
completed temporary jobs, as a percent other dismissal, and those who had been working a temporary job that ended,
of the civilian labor force all as a share of the civilian labor force. This measure will be lower than the
official unemployment rate (U-3) since it does not include persons who left jobs
voluntarily but are still looking for a new job, nor does it include new entrants
into the workforce.

U-3: Total unemployed (willing and Comments: This is the traditional (official) unemployment rate measure. It
able to work, and actively looking for measures total unemployment (those not working but willing and able to work,
a job), as a percent of the civilian labor and actively seeking employment over the prior four weeks) as a percentage of
force the total civilian labor force. The labor force is the total of unemployment (as
defined above) plus employment.

U-4: Total unemployed plus Comments: This measure will be at least equal to (and likely greater than) the
discouraged workers, as a percent official unemployment rate, since it includes discouraged workers in the total
of the civilian labor force plus number of underutilized workers. Discouraged workers belong to a subset of
discouraged workers. marginally attached workers, and have given a job-market related reason for
not looking currently for a job. Measure U-4 adds discouraged workers to the
civilian labor force to a create a larger workforce base.

U-5: Total unemployed, plus Comments: Marginally attached workers are persons who currently are
discouraged workers, plus all other neither working nor looking for work but indicate that they want and are
marginally attached workers, as a available for a job and have looked for work sometime in the recent past.
percent of the civilian labor force plus Measure U-4 includes discouraged workers, while measure U-5 also includes
all marginally attached workers. other marginally attached workers, so U-5 will typically be greater than U-4.

U-6: Total unemployed, plus all Comments: This measure uses the same workforce base as U-5, but adds the
marginally attached workers, plus number of persons employed part-time for economic reasons to the number of
total employed part-time for economic persons either unemployed or underutilized. Persons employed part-time for
reasons, as a percent of the civilian economic reasons are those who want and are available for full-time work but
labor force plus all marginally attached have had to settle for a part-time schedule.
workers.

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In 2008, by any measure of labor unemployment The following statement was prepared by the U.S. Bureau of
or underutilization, New Hampshire fared better Labor Statistics:
than the United States
Frequency and Availability of Alternative
10.5%
Measures of Labor Underutilization for States
New Hampshire The Current Population Survey (CPS) is the monthly
United States household survey, conducted by the U.S. Census Bureau
7.8%
for the Bureau of Labor Statistics (BLS), that is the direct
source of the national unemployment rate, but not state
6.8% unemployment rates. The sample is scientifically developed
5.8%
6.1% to represent the entire civilian noninstitutional population,
with about 60,000 households nationwide eligible for
4.6% interview each month. State sample sizes range from about
3.8% 4.0% 600 to 4,000 households. Due to the small sample sizes,
3.1%
the sampling errors and confidence intervals on the State-
level CPS data are considerably larger than their national
2.1% 2.1% counterparts.
1.2%
For all States and the District of Columbia, the official
monthly labor force and unemployment estimates are
developed using a statistical modeling approach, based on
U-1 U-2 U-3 U-4 U-5 U-6 historical and current relationships found within each State's
economy. Modeling results in estimates that are more
reliable than the direct survey estimates.

Alternative Measures of Labor Underutilization – Monthly statewide estimates from the CPS are used as
inputs in the statistical models. The monthly CPS estimates
NH vs. US, 2007 and 2008 on their own are far too variable to provide an accurate
U-1 U-2 U-3 U-4 U-5 U-6 picture of the labor market. Other than modeling, the way
in which the CPS estimates are made more reliable is by
New Hampshire 1.2% 2.1% 3.8% 4.0% 4.6% 7.8% aggregating the survey estimates over time. As a result,
2008 BLS generally produces CPS statewide estimates of
United States 2.1% 3.1% 5.8% 6.1% 6.8% 10.5% demographic and economic characteristics on an annual
average basis only. Due to the interest in the alternative
measures of labor underutilization and the rapidly changing
economy, 4-quarter moving averages are being developed
New Hampshire 0.9% 1.8% 3.6% 3.7% 4.2% 6.5% as well.
2007
United States 1.5% 2.3% 4.6% 4.9% 5.5% 8.3%

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