Alternative Unemployment Measures Signal Greater Michigan Labor Market Slack Since End of 2022

Beyond the traditional unemployment rate, the Bureau of Labor Statistics (BLS) produces additional unemployment rate measures to assess the health of the labor market. These range from the U-1 measure (narrowest in scope) to U-6 (broadest). This data is derived from the Current Population Survey (CPS), which produces this information at both the state and national levels.

These alternative unemployment measures provide added labor market perspectives that the standard unemployment rate alone cannot capture. These measures shed light on factors such as long-term unemployment, worker discouragement, and the prevalence of underemployment, providing valuable perspectives for data users, analysts and policymakers.

This article provides a summary of these alternative indicators, including what they measure and how they are calculated. It then examines recent trends in Michigan’s metrics over time and compared to the rest of the nation, presented as 12-month moving averages for Michigan and the U.S.

 

Alternatives Provide More Comprehensive Overview of the Job Market

Traditionally, the BLS and state labor market information centers have used the standard (U-3) unemployment rate to gauge unused and underused capacity (e.g. “slack”) in the job market. This is calculated by taking the total number of unemployed: those who do not have a job, are able to work, and have sought work over the past four weeks, as a proportion of the civilian labor force (those age 16 and older who are employed or unemployed). For decades, U-3 has been considered a key proxy for wider economic cycles and trends. However, it misses critical hidden aspects of labor market well-being. The other measures (U-1 through U-6) help to fill this information gap.

U-1 and U-2 are the narrowest alternative metrics in scope. U-1 looks at those unemployed long-term (15 or more weeks), serving as an indicator of persistent, long-term joblessness. When compared to the U-3, it helps to distinguish between structural unemployment (where there is a skills mismatch between workers and jobs available) and cyclical unemployment. U-2 is slightly broader than U-1, accounting for those who have lost a job or completed temporary employment. It highlights unemployment stemming from job separations.

U-4 through U-6 are more inclusive, building on the standard U-3 measure. U-4 takes the U-3 rate and adds in discouraged workers: those who are not in the labor force, are available to work, looked for a job in the past twelve months, but did not search in the past four weeks because they believed no jobs were available. As a result, U-4 serves as a proxy for job market pessimism. U-5 further adds those who have not recently looked for work for any reason (the “other marginally attached”), acting as a wider marker of hidden job market detachment. The final alternative measure, U-6, takes the U-5 definition and incorporates people who are employed part-time for economic reasons, such as those who are working on reduced hours but who would like a full-time job. At its core, U-6 is a combined metric of unemployment and underemployment, making it the most inclusive indicator of labor market slack.

Alternative unemployment measures range from narrowest (U-1) to broadest (U-6).

Measure	What the Rate Measures	How It’s Calculated
U-1	Long-term unemployment	(Unemployed 15+ weeks / civilian labor force) × 100
U-2	Unemployment from job loss	(Job losers + persons completing temporary jobs / civilian labor force) × 100
U-3	Standard unemployment	(Unemployed / civilian labor force) × 100
U-4	Unemployment plus those discouraged	(Unemployed + discouraged workers / civilian labor force + discouraged workers) × 100
U-5	Unemployment plus job market detachment	(Unemployed + all marginally attached / civilian labor force + all marginally attached) × 100
U-6	Unemployment and underemployment	(Unemployed + all marginally attached + employed part time for economic reasons / civilian labor force + all marginally attached) × 100

Source: U.S. Bureau of Labor Statistics

 

Most Inclusive Measure of Michigan’s Employment Shortfall Suggests Increased Hidden Slack Since Late 2022

Focusing on Michigan’s 12-month moving average U-6 rate reveals that greater labor market weakness in recent years began much earlier than the standard unemployment rate suggested.

After soaring to a pandemic-era high of 16.2 percent in March 2021, Michigan’s U-6 rate— which measures total labor market slack—fell to a low of 6.7 percent in May 2023 before rising again. This was eight months before the low reached by Michigan’s 12-month moving average U-3 rate, which dropped to 3.7 percent by January 2024 and continued until March 2024. However, the gap between the U-3 and U-6—which reflects underemployment and labor force detachment that is not measured by U-3—reached a low of 2.7 percentage points by September 2022, where it remained until November 2022. This indicates that the share of workers on the sidelines of the job market or working fewer hours than they’d like began increasing by 2022, more than a year before the standard unemployment rate.

Michigan’s U-6 rate also rose much quicker than the typical rate during the intervening period. Since November 2022, the state’s 12-month U-6 moving average jumped 2.5 percentage points to 9.3 percent in September 2025. This far exceeded the rise in U-3, which gained just one percentage point over the same period, from 4.2 to 5.2 percent. Consequently, the gap between Michigan’s U-3 and U-6 widened by 1.5 percentage points, from 2.7 to 4.1 percentage points.

The gap between Michigan's typical and broadest measure of job market slack has widened since November 2022.

Michigan 12-Month Moving Average U-3 and U-6 Unemployment Rates, November 2022-September 2025

 

Source: Current Population Survey, U.S. Bureau of Labor Statistics
Download the Data Table

 

Michigan’s Labor Underutilization Rates Rose Higher and Faster Than Those Nationwide Over Past Three Years

While Michigan’s broadest measure of unused labor capacity increased earlier and quicker than its standard rate, both state measures advanced higher and faster than their comparable nationwide rates since the end of 2022.

As of September 2025, Michigan’s 12-month moving average U-6 rate registered at 9.3 percent. This was 1.5 percentage points greater than the comparable nationwide figure of 7.8 percent. Likewise, Michigan’s U-3 rate was 5.2 percent, one percentage point above the nationwide figure of 4.2 percent.

Michigan’s measures also increased much more quickly than the nation. From November 2022 to September 2025, Michigan’s 12-month moving average U-6 rate rose 2.5 percentage points. This was more than double the 0.9 percentage point gain for the U-6 nationwide. For the typical rate, the gap was narrower but still substantial, with Michigan’s U-3 rising one percentage point over that period, double the 0.5 percentage point gain recorded nationwide.