What is the U6 underemployment rate?

The U6 rate is the Bureau of Labor Statistics' broadest measure of labor underutilization. It includes three groups: the officially unemployed (who are actively seeking work), "marginally attached" workers (who want a job and have looked in the past year but have stopped actively searching), and workers who are employed part-time but want full-time work for economic reasons (involuntary part-time).

The headline unemployment rate (U3) counts only people who are actively looking for work and cannot find it. This means it misses two important sources of slack. First, discouraged workers who have given up the job search are not counted as unemployed; they simply vanish from the labor force. Second, someone working 15 hours a week at a retail job but wanting 40 hours of professional work is counted as "employed" in U3 despite being significantly underemployed.

The gap between U3 and U6 provides useful information about the quality of employment, not just the quantity. During recoveries, U6 typically falls more slowly than U3 because involuntary part-time work persists even as headline unemployment drops. A large U6-U3 gap suggests hidden slack in the labor market that could restrain wage pressures. When the gap narrows to historical lows, it signals that the labor market is genuinely tight from every angle, supporting stronger wage growth.

As of recent readings, the U3-U6 gap has been approximately 3 to 4 percentage points, relatively typical of a mature expansion. During the 2008-2009 recession, U6 peaked at 17.1% while U3 peaked at 10%, revealing the enormous hidden slack beneath the headline number. For investors and policy analysts, U6 provides a more honest accounting of labor market conditions, particularly during transitions when the headline rate may paint an overly optimistic or pessimistic picture.