The unemployment rate is a key economic indicator that reflects the health of a country’s job market and economy. Unemployment adversely affects the disposable income of families, erodes worker morale, and reduces an economy’s overall output. As a result, it is widely considered to be one of the most significant economic indicators and receives considerable media attention.
Ultimately, high unemployment rates can negatively impact communities in a number of ways, including decreasing social cohesion, raising crime levels, and even impacting physical health. For example, a University of Nevada study found that people who experience long periods of unemployment suffer from worse health at age 50 than those who have been steadily employed.
The official unemployment rate is calculated by the Bureau of Labor Statistics (BLS) through a monthly survey. The survey includes households with at least one person who is either working or looking for work. It includes a wide variety of people, from those who are actively searching for jobs to those who have been laid off because of pandemic-related business closures and cutbacks. There are a few different metrics that measure unemployment, ranging from the U-1 measure—the strictest—to the U-6 measure, which is the most comprehensive and incorporates discouraged workers and those who would like to work but give up seeking employment because of other reasons.
The BLS estimates the civilian unemployment rate using a survey of about 60,000 households, or about 110,000 individuals. This survey is conducted each month, and a quarter of the households are randomly chosen to be interviewed. The BLS then determines the percentage of people who are either not working or are unemployed by dividing the total number of persons who are unemployed by the number of persons who are available to work.
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