Underemployment Risk Signal

Underemployment risk signal: assessing slack and under-utilisation in the labour market.

As of 2026-01-24

Gemini Summary

Signal Summary:

  • The Underemployment Risk signal (1) has transitioned to a HOT (stress ↑) regime as of 2025-12-01 (1). This indicates rising broad labour market slack and longer job-finding durations. Conviction Band: High, Interpretation Confidence: High Confidence, Internal Conflict Flag: No.

Key Dynamics:

  • The shift to HOT is driven by the composite z-score increasing to 1.25, surpassing the +0.75 threshold (1). Both the U-6 underutilization rate (8.4%) and median weeks unemployed (11.4 weeks) contributed, with their z-scores at 0.99 and 1.51, respectively (1). Both components show positive 3-month momentum.
  • Conditional Invalidation: The signal would weaken or reverse if the composite z-score consistently falls below +0.75, moving out of the HOT regime (1).

Scenario Balance:

  • Base Case dominant: Underemployment stress persists or slightly increases, supported by current positive momentum in slack indicators.
  • Upside secondary: Labour market resilience improves, and median weeks unemployed begin a sustained decline.
  • Downside residual: U-6 underutilization rises further, and job-finding frictions prolong significantly.

Time Horizon & Aggregation:

  • Time Horizon: Cyclical (months), reflecting the use of monthly data and 3-month momentum for assessing medium-term labour market trends (1).
  • Aggregation Weight Hint: High, due to its strong and coherent indication of rising labour market slack, which is a critical macro input.

Macro Relevance:

  • This signal primarily informs the slack dimension of the US labour market (1). A HOT regime suggests a mid-to-late cycle slowdown, with cooling demand and softening employment conditions (1). It typically interacts with inflation (potential downward pressure) and consumption (weakening).

Data & References:

  • U-6: Alternative measure of labor underutilization (LNS13327709), latest 8.4% as of 2025-12-01 (1).
  • Median weeks unemployed (LNS13008276), latest 11.4 weeks as of 2025-12-01 (1).
  • These two components and their 3-month momentum were most influential in the current state (1).
  • Additional public datasets: Job Openings and Labor Turnover Survey (JOLTS) data on quits and hires, and initial jobless claims, could enhance depth.

Underemployment Risk Signal Chart

Signal chart

Underemployment risk: diagnostic of slack in the labour market.

Underemployment Risk Signal Table▸
u6_underutilization_rate median_weeks_unemployed u6_pct_rank_fullsample weeks_pct_rank_fullsample Underemployment_Composite_pctRank u6_z weeks_z Underemployment_z Underemployment_0_100 Underemployment_Smoothed Underemployment_Regime u6_mom_3m weeks_mom_3m
date
2024-10-01 7.7 10.2 0.416667 0.625000 0.520833 0.515787 0.522186 0.518987 99.999999 0.450033 NEUTRAL -0.1 0.7
2024-11-01 7.7 10.7 0.416667 0.704545 0.560606 0.565702 0.637019 0.601360 99.999999 0.525697 NEUTRAL -0.1 1.1
2024-12-01 7.6 10.2 0.386364 0.625000 0.505682 0.494627 0.449661 0.472144 99.999999 0.498920 NEUTRAL -0.1 0.2
2025-01-01 7.5 10.1 0.359848 0.575758 0.467803 0.433601 0.511683 0.472642 99.999999 0.485781 NEUTRAL -0.2 -0.1
2025-02-01 8.0 9.9 0.522727 0.503788 0.513258 0.915380 0.505868 0.710624 99.999999 0.598203 NEUTRAL 0.3 -0.8
2025-03-01 7.9 9.7 0.492424 0.446970 0.469697 0.770847 0.351908 0.561377 99.999999 0.579790 NEUTRAL 0.3 -0.5
2025-04-01 7.8 10.2 0.458333 0.625000 0.541667 0.674491 0.674491 0.674491 99.999999 0.627140 NEUTRAL 0.3 0.1
2025-05-01 7.8 9.5 0.458333 0.367424 0.412879 0.622607 0.250973 0.436790 99.999999 0.531965 NEUTRAL -0.2 -0.4
2025-06-01 7.7 10.1 0.416667 0.575758 0.496212 0.518839 0.625138 0.571988 99.999999 0.551977 NEUTRAL -0.2 0.4
2025-07-01 7.9 10.2 0.492424 0.625000 0.558712 0.674491 0.622607 0.648549 99.999999 0.600263 NEUTRAL 0.1 0.0
2025-08-01 8.1 9.9 0.564394 0.503788 0.534091 0.830142 0.364590 0.597366 99.999999 0.598814 NEUTRAL 0.3 0.4
2025-09-01 8.1 10.1 0.564394 0.575758 0.570076 0.778259 0.487132 0.632695 99.999999 0.615755 NEUTRAL 0.4 0.0
2025-10-01 8.1 10.1 0.564394 0.575758 0.570076 0.726375 0.462508 0.594441 99.999999 0.605098 NEUTRAL 0.2 -0.1
2025-11-01 8.7 9.8 0.659091 0.473485 0.566288 1.348982 0.245269 0.797125 99.999999 0.701112 HOT (stress ↑) 0.6 -0.1
2025-12-01 8.4 11.4 0.609848 0.806818 0.708333 0.985794 1.512494 1.249144 99.999999 0.975128 HOT (stress ↑) 0.3 1.3
Methodology: Underemployment Risk Signal