(CNSNews.com) - Federal Reserve Chair Janet Yellen said Tuesday at a Senate Banking Committee hearing that the U-6 unemployment rate--which includes people who are working part-time for economic reasons and those who are marginally attached to the labor force--“definitely shows a less rosy picture” of employment in the country.
People "marginally attached" to the labor force "are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for one work sometime in the past 12 months."
In January, according to the Bureau of Labor Statistics, the "U-3" unemployment rate, which is the one generally reported, was 5.7 percent. U-6 was 11.3 percent.
The "U-3" rate counts as "unemployed" only people who actively sought a job in the past four weeks but did not find one.
Chairman Richard Shelby (R-Ala.) asked Yellen, “Do you agree that the unemployment number that you cited, 5.7 percent, in your opening statement paints a rosy or better picture of the true unemployment rate?”
“The U-6 is a broader measure of unemployment, and it includes marginally attached and discouraged workers and also an unusually large number of individuals who are working part-time who would like full-time jobs, so it is a much broader indicator of underemployment or unemployment in the U.S. economy,” Yellen said. “And a lot of it’s come down. It was 12.1 percent a year ago. It’s come down from there to 11.3. It definitely shows a less rosy picture than U-3 or the 5.7 percent number.”
“And I did mention that we don’t at this point, in spite of the fact the unemployment rate has come down, don’t feel that we have achieved so-called maximum employment in part for these very reasons,” Yellen said.
“Labor force participation has come down, has been trending down. That is something that will continue for demographic reasons. I don’t expect it to move up over time, but I do think a portion of the depressed labor force participation does reflect cyclical weakness in the stronger job market more people would enter,” she said.
Shelby asked, “But you basically concede that 11.3% of underemployed people, that is not good in this country?”
“That is abnormally high level, and it signifies weakness that would be good to address,” said Yellen.
In her opening remarks, Yellen touted the widely reported unemployment rate of 5.7 percent but did address a decline in the labor force participation rate.
“Since my appearance before this committee last July, the employment situation in the United States has been improving among many dimensions,” said Yellen. “The unemployment rate now stands at 5.7 percent, down from just over 6 percent last summer and from 10 percent at its peak in late 2009. The average pace of monthly job gains picked up from about 240,000 per month during the first half of last year to 280,000 per month during the second half, and employment rose 260,000 in January.
“In addition, long-term unemployment has declined substantially. Fewer workers are reporting that they can find only part-time work when they would prefer full-time employment, and the pace of quits - often regarded as a barometer of worker confidence in labor market opportunities - has recovered nearly to its pre-recession level,” she said.
“However, the labor force participation rate is lower than most estimates of its trend, and wage growth remains sluggish, suggesting that some cyclical weakness persists,” said Yellen.