The government records several measures of unemployment levels. The headline news value touts the unemployment rate at “X%”. The government refers to this as the Official unemployment rate or U3.
The U3 is defined as the total number of people without jobs (which occurs when people are without jobs and they have actively looked for work within the past four weeks) divided by the total civilian labor force. The U3 rate was 4.7% in February, down 0.2% y/y.
The U6 unemployment rate or what some people call the “true” unemployment rate adds discouraged workers and people working part time because they have been unable to land a full time position. The U6 unemployment rate was 9.2% in February, down 0.5% y/y.
Figure 1 charts the U3 and U6 as a percent of the total civilian work force as overlaid bar-charts read on the left-hand axis and the labor force in millions, read on the right-hand axis. The U6 reached a peak of 17.4% in October 2009. The U3 also peaked the same month, recording a level of 10.1% unemployment. The civilian labor force at the time was 153.78 million people and the civilian population was 236.55 million. Thus the labor participation rate was 65.0%. Looking at the same data for February 2017, we note the U6 at 9.2% and the U3 at 4.7% are at the lowest levels since April 2008. The current civilian population has grown to 254.25 million and the labor force to 160.06 million. However the labor participation ratio has shrunk 2.0% to 63.0% over this interval. The main reason for the shrinking labor participation ratio is because the baby boomers are retiring in droves. A recent article in the Washington Post broke out the numbers: 76 million baby boomers were born between 1946 and 1964. That means they will retire over a 19 year period. 76 /19 = 4 million or close to 11,000 per day. This is shifting the worker to beneficiary ratio and putting a strain on the future health of social security.
At Gerdau, we keep a keen eye on the employment numbers, especially manufacturing and construction since this is where most long product steel ends-up. In addition we know that growth in net job creation correlates to increased steel consumption.