((1-Civilian Unemployment Rate/100)+Capacity Utilization: Total Industry/100-(1.46-Nonfarm Business Sector: Labor Share/100*0.76)*(Capacity Utilization: Total Industry/100)^2*(1-Civilian Unemployment Rate/100)^2)/(Nonfarm Business Sector: Labor Share/100*0.76)
Capacity Utilization: Total Industry (TCU) is the percentage of resources used by corporations and factories to produce goods in manufacturing, mining, and electric and gas utilities for all facilities located in the United States (excluding those in U.S. territories).(1) We can also think of capacity utilization as how much capacity is being used from the total available capacity to produce demanded finished products.
Capacity utilization indexes are constructed for 71 industries in manufacturing, 16 in mining, and 2 in utilities. (1) Physical data on capacity utilization are primarily compiled from trade sources and government sources, such as the U.S. Geological Survey and the U.S. Energy Information Administration.(1) When physical data are unavailable, capacity utilization data are compiled from the U.S. Census Bureau’s Quarterly Survey of Plant Capacity Utilization, which provides data for almost 70 percent of total industry capacity.(1) Additionally, the capacity index is developed on a monthly basis, designed to be consistent with the production index.(1)
According to the Board of Governors of the Federal Reserve System, the capacity index tries to conceptualize the idea of sustainable maximum output, which is defined as the highest level of output a plant can sustain within the confines of its resources. The Board of Governors defines the seasonally adjusted capacity utilization rate as the output index divided by the capacity index. The capacity utilization rate can also implicitly describe how efficiently the factors of production (inputs in the production process) are being used. (1) It sheds light on how much more firms can produce without additional costs. Additionally, this rate gives manufacturers some idea as to how much consumer demand they will be able to meet in the future.
The Federal Reserve strives to construct a capacity index consistent with time by using different relevant data sources.(1) Developing an index that is reasonable given the time period is the primary aim for this index, but there are still some difficulties. Extensive technological and structural changes have and will continue to occur, affecting the degree of tightness the Federal Reserve index of capacity utilization will represent.(2) In addition, each series of capacity utilization is flawed by commission; therefore, they should be used with caution.(2)
(1) Board of Governors of the Federal Reserve System. “Industrial Production and Capacity Utilization.” Statistical release G.17;. May 15, 2013.
(2) Bauer, Paul W. and Deily, Mary E. “A User’s Guide to Capacity- Utilization Measures.” Economic Commentary. Federal Reserve Bank of Cleveland, July 1, 1988; https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/economic-commentary-archives/1988-economic-commentaries/ec-19880701-a-users-guide-to-capacity-utilization-measures.aspx.
Board of Governors of the Federal Reserve System (US), Capacity Utilization: Total Industry [TCU], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TCU, July 25, 2017.
Source: U.S. Bureau of Labor Statistics
Release: Employment Situation
The unemployment rate represents the number of unemployed as a percentage of the labor force. Labor force data are restricted to people 16 years of age and older, who currently reside in 1 of the 50 states or the District of Columbia, who do not reside in institutions (e.g., penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.
This rate is also defined as the U-3 measure of labor underutilization.
The series comes from the 'Current Population Survey (Household Survey)'
The source code is: LNS14000000
U.S. Bureau of Labor Statistics, Civilian Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UNRATE, July 25, 2017.
Source: U.S. Bureau of Labor Statistics
Release: Productivity and Costs
U.S. Bureau of Labor Statistics, Nonfarm Business Sector: Labor Share [PRS85006173], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/PRS85006173, July 25, 2017.
- Monthly, Seasonally Adjusted (population data is not adjusted for seasonal variation; not seasonally adjusted version used)
- Table A-10. Selected unemployment indicators, Seasonally adjusted: Monthly, Unemployment Rates
- Table A-15. Alternative measures of labor underutilization: Monthly, Seasonally Adjusted