August underemployment increases

 On September 4, 2009, the Bureau of Labor Statistics (BLS) released the August unemployment data. The commonly quoted unemployment rate, better known as U-3 increased from 9.4% to 9.7%. However the lesser known unemployment definition known as U-6 increased from 16.3% in July to 16.8% in August.

 

The BLS currently defines unemployment with six metrics beginning with the narrowest called U-1 and the widest called U-6.  For greater discussion on U-6 read Redefining the unemployment rate.

 

According to the BLS data beginning in January 1994, the August 2009 rate is the highest moment of the data. In January 1994 U-6 was reported at 11.8% and continued to fall during the 1990s when it eventually bottomed at 6.9% in December 2000. The same month U-3 bottomed at a 31 year low.
In 2003, U-6 peaked at 10.4% and then bottomed in March 2007 as the recession officially began in December of 2007 when U-6 reached 8.7%. 

 

U-3 also bottomed at 4.4% in March 2007. Read August unemployment rate for long term trends in the national unemployment rate.

 

By October 2008, U-6  reached 12%, the highest point in the dataset at that time and has continued to climb to its recent rate of 16.8%.

 

Is the U-6 metric a better gauge of unemployment than the U-3 metric? As people move between the U-6 and the U-3 categories, does this add to the lagging effect of the unemployment rate when the economy begins to recover?