What Happens to Federal Funds Rate When U-6 Unemployment Exceeds 10%?
U-6 captures broader labor underutilization beyond the headline rate. What happens when it exceeds 10%, signaling widespread labor stress?
How Federal Funds Rate Responds
Scenario Background
U-6 is the broadest unemployment measure: it adds discouraged workers (who want work but have stopped searching) and part-time-for-economic-reasons workers (who want full-time but cannot find it) to the standard unemployed. U-6 exceeding 10% signals that labor-market stress extends well beyond the headline U-3 rate.
Read full scenario analysis →Historical Context
U-6 data begins in 1994. It exceeded 10% during 2002-2004 (recession aftermath, peak 10.5%), 2008-2014 (financial crisis, peak 17.2% in October 2009), and April-October 2020 (COVID, peak 22.8%). Each episode produced prolonged consumer-spending weakness and housing-market distress. The 2008 episode saw U-6 stay above 10% for 7 years, the longest such period on record, reflecting the structural unemployment that followed the housing bubble. The 2020 episode was compressed (10+ only for 7 months) ...
What to Watch For
- •U-6-minus-U-3 gap widening past 4 percentage points
- •Part-time-for-economic-reasons share of employment rising
- •Labor-force participation declining alongside rising U-6
- •Continuing claims above 2.0 million confirming long-duration unemployment
- •Credit card delinquency rising above 4%
Other Assets When U-6 Unemployment Exceeds 10%
Other Scenarios Affecting Federal Funds Rate
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