Idaho’s labor underutilization rates show a clear difference in job opportunities between urban and rural areas. Labor underutilization rates are developed by the Bureau of Labor Statistics and provide an overview of how effectively a workforce is employed, identifying where potential labor resources are underutilized. Business leaders and government officials sometimes use this information to identify specific groups of underutilized workers and develop strategies to reduce workforce inefficiencies in other areas.
Alternative measures of labor underutilization
The official unemployment rate is a crucial indicator of not only the labor market, but the economy as a whole. Tracking what percentage of the labor force is not employed can be used to measure the demand for labor, with a low unemployment rate indicating a high demand for labor — which in turn — indicates a strong and growing economy. A person is defined as “unemployed” by the Bureau of Labor Statistics if “they do not have a job, have actively looked for work in the prior four weeks and are currently available for work.” [1]
While this definition works for much of our labor distressed population, it does not work for all of them. For example, “marginally attached workers” are jobless and want to work but feel there are no available jobs for them and have given up looking for work. There are also those who want full-time employment but are currently working part-time because they are unable to find full-time employment.
Due to these discrepancies, the Bureau of Labor Statistics has created six alternative measures of labor underutilization to track other forms of labor market distress not counted in the official unemployment rate.
Figure 1 shows Idaho’s 2022 and 2023 six measures of labor underutilization and their definitions. This is an over-the-year change in alternative measures of labor utilization for Idaho. (Note: these measures are annual averages based on quarterly data, due to their infrequency and aggregation, these measures are more volatile and estimate-based than the U-3 headline unemployment figure)
Figure 1 – Alternative measures of underemployment for 2022-2023
What the measures tell us and how they are used
When graphing measures over time, the gap between U-6 and other measures of labor underutilization becomes apparent (as shown in Figure 2). This indicates that those employed part-time for economic reasons is the largest share of labor underutilization in Idaho, and while that measure grows in a recession, it is still an outlier even in expansionary periods. Understanding this information can help decision makers, both private and public, in creating solutions that allow for more opportunities for those working less than desired due to economic reasons.
Figure 2
Source: The Bureau of Labor Statistics [2]
These alternative measures of labor underutilization are particularly useful during recessions or downturns as a way of pinpointing specific groups in the labor force. Figure 3 uses the COVID-19 pandemic as an example. If we compare Quarter 1 (the beginning of the year before the onset of the pandemic) to Quarter 2 (the beginning of the pandemic with subsequent layoffs and lockdowns) five of the six measures rose significantly. However, the U-6 measure grew 2.5% from Quarter 1 to Quarter 2 compared to the 1.3% growth of U-2 and the 1.5% growth of U-3 through U-5. This indicates that the number of individuals working part-time for economic reasons was the more volatile category than the other measures during the beginning of the pandemic recession.
Figure 3
Source: The Bureau of Labor Statistics [2]
Estimating labor underutilization for Idaho counties
Source: The Bureau of Labor Statistics [2]
Breaking down the estimates by county can help illustrate the rural and urban divide in Idaho. Rural counties tend to have a higher rate of labor underutilization than urban counties in the state. Rural counties tend to have larger labor underutilization due to a variety of factors: more seasonal employment, less infrastructure and less high-wage positions. Madison County is an outlier. With a large population due to the college town of Rexburg, many students work part-time in retail and customer service occupations. The college also runs on a track system, meaning all students have a three-month break once per year. Lots of students move in and out frequently, creating a constant churn in employment that creates significant labor underutilization.
Alternative measures of labor underutilization illustrate a larger picture of the overall distressed labor population. Understanding the urban-rural divide, how the specific measures are impacted during a downturn and that the largest share of underutilization comes from people working part-time for economic reasons, can help public and private decision makers develop solutions to help create a more efficient labor force.
Sources:
[1] How the Government Measures Unemployment : U.S. Bureau of Labor Statistics (bls.gov)
Seth.Harrington@labor.idaho.gov, labor economist
Idaho Department of Labor
208-696-2364
This Idaho Department of Labor project is funded by the U.S. Department of Labor for SFY24 as part of a Workforce Information grant (48%) and state/nonfederal funds (52%) totaling $704,259.