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Alternative Measures of Unemployment Using Twelve Month Moving Averages

Broad Unemployment and Underemployment

Note: All of the following measures roll 12 months of data together and so do not fully reflect current conditions. However, the Current Population Survey sample in Minnesota, from which these data are derived, is too small (900 households) to report these measures using data for a single month.

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 May, the official unemployment increased to 4.2 percent from 3.5 percent in April and was 1.1 percentage points higher than a year ago.

“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 increased by 0.7 percent point to 4.3 percent in May, and was 1.2 percentage point higher compared to 12 months ago.

The marginally attached workers increase the count of unemployed still further in the U-5 measure. In May, the U-5 further increased to 4.8 percent from 4.1 percent in April, and also experienced an over-the-year increase of 1.3 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 fulltime work. In May, the U-6 increased by 1.1 percentage points to 7.6 percent, up from 6.5 percent in April. The U-6 in May was 2.1 percentage points higher than what it was 12 months ago (5.5 percent in May of 2019).

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

Alternative unemployment rates in Minnesota as of May 2020:

Measure*

May– 20

April– 20

May -19

Monthly Change

Annual Change

U-3

4.2

3.5

3.1

+0.7

+1.1

U-4

4.3

3.6

3.1

+0.7

+1.2

U-5

4.8

4.1

3.5

+0.7

+1.3

U-6

7.6

6.5

5.5

+1.1

+2.1


*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


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 May, the number of long-term unemployed increased by 200 over April, to 11,600, and was 2,700 higher than twelve months back. The share of long-term unemployed however fell by 1.5 percentage points to 8.9 percent, down from 10.4 percent in April, and represented a 0.4 percentage points decrease from twelve months back.

Long-term unemployment in Minnesota as of May 2020:

Measure*

May– 20

April– 20

May -19

Monthly Change

Annual Change

Number Long-Term

11,600

11,400

8,900

+200

2,700

Share Long-Term

8.9

10.4

9.3

-1.5

-0.4


*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


Unemployment by age and gender

Teen unemployment increased further in May, up from 9.6 percent in April to 10.5 percent. Over the year, teen unemployment was higher by 2.9 percentage points. The unemployment rate among men increased to 4.8 percent, up from 4.1 percent in April. The unemployment rate for women also increased to 3.5 percent in May, up from 2.9 percent in April. All three groups had higher unemployment rates than one year ago.

Unemployment rates by age and gender in Minnesota as of May 2020:

Group

May -20

April– 20

May -19

Monthly Change

Annual Change

Teenagers

10.5

9.6

7.6

+0.9

+2.9

Women

3.5

2.9

2.2

+0.6

+1.3

Men

4.8

4.1

3.9

+0.7

+0.9


Graph- Minnesot Unemployment by Age and Gender

Unemployment by race or ethnicity

When we break out unemployment rates by race, we find that the Black unemployment rate increased to 6.1 percent over the month (4.3 percent in April), white unemployment rate increased to 4.0 percent from 3.5 percent in April, and the Hispanic unemployment rate increased from 4.4 percent in April to 6.0 percent in May. 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. The impact of the COVID-19 crisis on minority communities of Minnesota will be better gauged as more data comes in over the next few months.

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 the year 2018 at this link , and for years 2014, 2015, 2016, and 2017 at this link . Information on the native-born and foreign-born populations for 2018 can be found at this link .

Unemployment rates by race or ethnicity in Minnesota as of May 2020:

Group

May -20

April– 20

May -19

Monthly Change

Annual Change

Black

6.1

4.3

6.5

+1.8

-0.5

White

4.0

3.5

2.7

+0.5

+1.3

Hispanic

6.0

4.4

4.5

+1.6

+1.5



Graph- Minnesota Unemployment by Selected Race or Ethnicity

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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