Discouraged Worker

What is a discouraged worker? This is a term economists use to describe a jobless person who would like to have a job but has given up looking for one. But why not just call these people "unemployed"?

Well, the Bureau of Labor Statistics, or BLS, actually defines and measures six unemployment rates, called U1 through U6. U1 through U3, the more stringent definitions of unemployment, do not include discouraged workers. However, U4 through U6, the less stringent definitions, do include some discouraged workers -- people who say they want a job, and although they haven't looked for work in the past four weeks, they have looked in the past year. So the BLS does track and count these discouraged workers as unemployed, but only in certain unemployment measures -- U4, U5 and U6.

Now, U3 is the official unemployment rate that we usually see in the news, and we define this as those who are unemployed and have looked for work in the past four weeks. But we don't see discouraged workers -- those who have given up looking. It's only at U4 that some discouraged workers start to be included.

Let's take a closer look. Including discouraged workers in U4 increases the unemployment rate slightly from the official definition of U3, but the two rates move together very closely. As a general rule, most of the alternative definitions of unemployment track each other quite closely. So if things are getting worse by one measure, they're usually getting worse by all measures. The same thing is true when things are getting better.