>I know this topic has been discussed on this list a number of times
>before, however a basic question remains: why isn't the U-6 number
>used as the official unemployment figure,
>rather than the currently used U-3 number ?
>
>By simple definition, the unemployment rate is a figure that
>attempts to measure the percentage of the population that is not
>working, but would like to be, and, as such, is one
>indicator of how well the 'economy is functioning'.
The reason is that the unemployment rate isn't really intended as a measure of how well the economy is functioning, but how much slack there is in the labor market from an employer's point of view. People who are "marginally attached" to the labor force are mostly outside the wage-setting mechanism. Their skills are likely to be marginal or rusty, and of significantly less interest to potential bosses.
Greenspan looks at what he calls the "pool of available workers," which is the officially unemployed plus those counted as "not in labor force - want job now" (that is, they've dropped out of the LF, but not too far out). That number is less than the officially unemployed - at the peak of the boom it was around 75% as large as the officially unemployed; now it's around 60%.
Doug