U3 Unemployment Rate

• Tends to track the natural growth of GDP during positive business cycles
• Tracks the natural growth/contraction of the business cycle
• Recessions Usually form when the rate drops below 4%
• This happened after 1960s and 1990s expansions

U3 Unemployment Rate Criticisms

• The U3 rate does not include those who are not participating in the labor market
• A more accurate rate would look at total person hours available & worked
• For Example, the labor force participation rate dropped from 67% i the 1990s to 62.7% in 2018
• The metric counts different quality jobs the same
• A 10 hour per week  side job is counted similarly to a 50+ hour job with full benefits
• Also incorporates assumptions and adjustments that may be inaccurate
• Ex.  In 2008-2009 jobs were overestimated by 500k because a previous trend was assumed to continue (when in reality it had reversed)