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Alternative Measures of Unemployment

Minnesota's official unemployment rate is a useful indicator of the health of the state’s economy, but it doesn’t tell the whole story. We can get a more complete picture of Minnesota's labor market by looking at alternative measures of unemployment, and by breaking down the rates by age, gender, and race. The numbers below come from the Current Population Survey. Please note that all data below are presented as averages over the past 12 month, and thus do not fully reflect monthly trends.

Broad Unemployment and Underemployment

The Bureau of Labor Statistics has developed six alternative definitions of unemployment and underemployment, labeled U-1 through U-6. The official unemployment measure, called U-3, is the share of those aged 16 and over who, at the time of the monthly survey, were not employed in the past week and who have looked for work sometime in the past four weeks. Importantly, this excludes anyone who was not seeking work in the past month for any reason. This group is considered “not in the labor force.” In February, the official unemployment rate inched up again for the second consecutive month, by one-tenth of a point to 3.0 percent (up from 2.9 percent in January), and was 0.2 percentage points lower than 12 months ago. Note that the U-3 number reported in this analysis may differ slightly from the official state unemployment estimate, because the official rate is calculated using a different method by the LAUS program. The number reported here is directly comparable to the other rates in this analysis.

What about people who want a job, but aren’t actively searching because they think there are no jobs available that fit their qualifications? These “discouraged workers” are considered to be out of the labor force, but they reveal additional untapped potential in the labor market. People who have looked for work in the past year, but stopped looking for the past month because they think they cannot find a job are included in a broader measure of unemployment called U-4. This rate tends to closely follow the U-3 rate, and remain steady at 3.0 percent in February vis-à-vis January, and was 0.3 percentage points lower than 12 months ago.

What if we add all the other “marginally attached” workers, people who looked for work sometime in the past twelve months but, for other reasons, did not look in the past four weeks? These marginally attached workers increase the count of unemployed still further in the U-5 measure. The U-5 inched up for the second consecutive month in February by 0.1 percentage point to 3.4 percent, with an over-the-year decrease of 0.2 percentage points.

The broadest measure of unemployment is U-6, which includes all of the above and adds people who are employed part-time but want full-time work. In February, the U-6 remained at the January level of 5.5 percent. The U-6 decreased by 0.7 percentage points from its level 12 months ago.

The chart below shows that all of the alternative measures of unemployment are down from one year ago and one month ago.

Alternative unemployment rates in Minnesota as of February 2019:

Measure*

February -19

January -19

February -18

Monthly Change

Annual Change

U-3

3.0

2.9

3.2

+0.1

-0.2

U-4

3.0

3.0

3.3

0.0

-0.3

U-5

3.4

3.3

3.6

+0.1

-0.2

U-6

5.5

5.5

6.2

0.0

-0.7


*Definitions of Measures:

U-3 Official unemployment rate

U-4 Discouraged plus officially unemployed

U-5 All marginally attached (including discouraged) plus officially unemployed

U-6 Involuntary Part Time plus marginally attached, discouraged, and officially unemployed

Involuntary Part time—a component of U-6, including only persons working less than 35 hours per week who want, but cannot find, a full-time job


Graph- Minnesota Unemployment and Underemployment


The long-term unemployed

Long-term unemployment—lasting more than 26 weeks (six months)—imposes costs on people that go well beyond lost wages. Future earnings are lower, and health, relationships, and self-esteem can suffer. It is important to note that the percentage of long-term unemployed persons represents a share of unemployed persons only, while other unemployment rates represent a share of the entire labor force, which includes all persons age 16 or older who are working or looking for work.

In February, the number of long-term unemployed was 9,500, down by 2,400 from 11,900 in January, and down by 4,700 since twelve months back. The share of long-term unemployed also decreased by 2.8 percentage points, from 13.2 percent in January to 10.4 percent in February. This share also decreased by 3.8 percentage points from twelve months back. The number of long-term employed for the first time fell below 10,000 and was at a historic low in February, with data going back to December 2001. As a basis of comparison, August 2011 recorded the highest number of long-term unemployed, at 75,100, when the Minnesota economy was still languishing from the after-shock of the Great recession. The share of long-term unemployed was also the lowest since September 2002.

Long-term unemployment in Minnesota as of February 2019:

Measure*

February -19

January -19

February -18

Monthly Change

Annual Change

Number Long-Term

9,500

11,900

14,200

-2,400

-4,700

Share Long-Term

10.4

13.2

14.2

-2.8

-3.8

*Long term is defined as more than 26 weeks. The share of long term is expressed as a percentage of all unemployed (U-3).


Graph- Minnesota Long-Term Unemployed (more than 6 months)


Unemployment by age and gender

We can often find interesting differences when we break out unemployment rates by age and gender. Teen unemployment increased to 6.8 percent in February, up from 6.2 percent in January. Over the year, teen unemployment decreased by 1.2 percentage points.

The unemployment rate among men increased by one-tenth of a point to 3.8 percent in February, up from 3.7 percent in January. Over the year, men’s unemployment rate increased by 0.1 percentage points. The unemployment rate for women remained steady at the historically low of 2.1 percent, the lowest since January 2002. Over the year, women’s unemployment rate was lower by 0.5 percentage points.

Unemployment rates by age and gender in Minnesota as of February 2019:

Graph-Minnesota Employment by Age and Gender


Unemployment by race or ethnicity

When we break out unemployment rates by race, we find that Black unemployment further increased to 6.4 percent in February, up from 6.0 percent in January, for a 0.5 percentage point decrease over-the-year. February unemployment rate is the highest for Blacks since April 2018. The Black unemployment rate has been increasing since December 2018, and continues to be much higher than that of the White unemployment rate. The Hispanic unemployment rate also increased, to 5.0 percent in February, up from 4.8 percent in January, and was also higher by 1.7 percentage points since twelve months back. While Black and Hispanic unemployment rates increased, White unemployment rate remained steady at 2.6 percent, and was 0.2 percent point lower than twelve months back. It should be noted that due to relatively small sample sizes, the calculated unemployment rates for Black and Hispanic individuals are more susceptible to random measurement error.

Also see the American Community Survey for a broader selection of unemployment data by race or origin, including White, Black or African American, Hispanic or Latino, American Indian and Alaskan Native, Asian, and more. Population profiles for all available races are available for download below. Note that the American Community Survey data are collected and calculated by a method which differs from the Current Population Survey numbers shown in this report. American Community Survey 1-year Population Profiles for All Available Races in Minnesota can be found for years 2014, 2015, 2016, and 2017 at this link . Information on the native-born and foreign-born populations can be found here .

Unemployment rates by race or ethnicity in Minnesota as of February 2019:

Group

February -19

January -19

February -18

Monthly Change

Annual Change

Black

6.4

6.0

6.9

+0.4

-0.5

White

2.6

2.6

2.8

0.0

-0.2

Hispanic

5.0

4.8

3.3

+0.2

+1.7


Graph- Minnesota Unemployment by Selected Race or Ethnicity

Looking ahead

Generally low and stable unemployment and underemployment mean that Minnesota’s economy is still strong. The differences seen when breaking the numbers out by racial groups show that there is still room for improvement in Minnesota’s employment situation.

Notes on using Current Population Survey state data:
Data above are presented as 12-month moving averages. Each monthly data point is an average of that month and the previous 11 months. Twelve-month moving averages are calculated differently than the official estimates of unemployment and should not be compared directly. Learn more about using CPS subnational data at https://www.bls.gov/cps/cps_htgm.pdf

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