Dr. Mark Shore, CME Group
At a Glance:
- U-3 is the official unemployment rate and provides a baseline for understanding the labor market.
- U-6 offers a more complete picture, including part-time workers and those who have stopped looking for jobs.
Every month, a single report can have a big impact on global markets and shape the decisions of companies worldwide. This report, known as the “jobs report” or the Employment Situation Summary, is a treasure trove of data on unemployment rates and payroll changes. But how much do these numbers really tell us about the state of the U.S. labor market?
To understand the full picture, we need to dive into the two key surveys that make up this report: the Establishment Survey and the Household Survey.
The Establishment Survey collects data from businesses, giving us a snapshot of the job market from the employer’s perspective. It covers a wide range of industries and company sizes, with about 45% of the sample coming from businesses with fewer than 20 employees.
On the other hand, the Household Survey, also known as the Current Population Survey, gathers information directly from individuals.
This survey includes self-employed workers, unpaid family workers, agricultural workers and private household workers – groups often overlooked by the Establishment Survey. It provides a more personal and comprehensive view of the labor market.
The Bureau of Labor Statistics (BLS) categorizes the Household Survey data into six unemployment indices, from U-1 to U-6. But the two we are closely watching are:
- U-3, the official unemployment rate, includes people who are not working, have searched for work in the past four weeks and are available to work. This is the widely accepted international definition of unemployment.
- U-6, a broader measure, includes part-time workers who want full-time jobs and those who have given up looking but are still available. U-6 offers a more comprehensive and nuanced view of the labor market.
Now, let’s look at some examples to see why U-6 matters. During the financial crisis, U-3 peaked at 10% in October 2009, while U-6 reached 17.2% in December 2009. In April 2020, during the height of the COVID-19 pandemic, U-3 hit 14.8%, but U-6 soared to 22.9%.
When unemployment rises, U-6 usually increases more rapidly, indicating more widespread labor market challenges. Historically, U-6 is about 83% higher than U-3, with a spread often greater than 3.3 percentage points.
By understanding both U-3 and U-6, business leaders and policymakers can better navigate the complexities of the labor market, identify emerging trends and develop strategies that address the broader economic landscape.
So, the next time you hear about the unemployment rate, remember there’s more to the story.
CME Group futures are not suitable for all investors and involve the risk of loss. Full disclaimer. Copyright © 2025 CME Group Inc.