Chapter 17, Problem 1FCT

To determine

To explain:

Whether U-6 version of the natural unemployment is higher or lower than the traditional natural unemployment rate.

Concept introduction:

The six classifications of unemployment that the Bureau of Labour Statistics uses:

U1 is the percentage of labour force unemployed for 15 weeks or longer.

U2 is the percentage of labour force that lost jobs or completed temporary work.

U3 is the official unemployment rate as per the International Labour Organization’s definition. It is the percentage of labour force that is without jobs and has actively looked for work within the past four weeks.

U4 is U3 + “discouraged workers”, or those who have stopped looking for work because current economic conditions has made them believe that no work is available for them.

U5 is U4 + other “marginally attached workers”, or “loosely attached workers”, or those who “would like” and are able to work but have not looked for work recently.

U6 is U5 + the part-time workers who want to work full-time, but cannot do so due to economic reasons, i.e. the economy is bad, so their employer cut their hours and they can’t find other work.