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Jun 5, 2020 · The unemployment rate measures how many people who want a job and are available for work can find a job. June’s unemployment rate indicates that roughly 1 in every 9 people in the labor force ...
- Overview
- Why the Unemployment Rate Matters
- Compiling Labor Statistics
- Employment v Unemployment
- Measures of Unemployment
- The U-6 Measure
- The Unemployment Test
- What Is the Unemployment Rate?
- What Is the Highest Unemployment Rate?
- How to Reduce Unemployment?
is defined as the percentage of unemployed workers in the total labor force. It is widely recognized as a key indicator of the performance of a country's labor market.
the unemployment rate attracts a lot of media attention, especially during recessions and challenging economic times. This is because the unemployment rate doesn't just impact those individuals who are jobless; the level and persistence of the factors of unemployment have wide-ranging impacts across the broader economy.
The unemployment rate is the proportion of unemployed persons in the labor force.
Unemployment adversely affects the disposable income of families, erodes purchasing power, diminishes employee morale, and reduces an economy's output.
Bureau of Labor Statistics (BLS)
, when workers are unemployed, their families lose wages, and the nation as a whole loses its contribution to the economy in terms of the goods or services that could have been produced.
Unemployed workers also lose their
, which can lead to unemployment for other workers, creating a cascading effect that ripples through the economy. In this way, unemployment even impacts those who are still employed.
When companies are trying to cut costs, they often reduce their workforce as one of their cost-saving measures. Those workers who are left to do more work after a company lays off part of their staff are not likely to receive any additional compensation for the extra hours they are working.
Unemployment can also have a negative effect on the mental state of those who are still employed. They may become more concerned about losing their jobs or be hesitant to search for other employment because they have a false belief that they "are lucky" to be employed at all. They may even feel guilty about having a job when their co-workers are out of work.
One misconception about the unemployment rate is that it is derived from the number of people filing claims for
benefits. But the number of UI claimants does not provide accurate information on the extent of unemployment. This is because people may still be jobless after their benefits run out, while other applicants for UI benefits may not be eligible for benefits or may not even have applied for them.
Tracking every unemployed person monthly would also be very expensive, time-consuming, and impractical. Therefore, the U.S. government conducts a sample survey—the
—to measure the extent of unemployment in the nation.
The basic definitions used by the BLS in compiling labor statistics are quite straightforward:
People with jobs are employed.
People who are jobless, looking for jobs, and available for work are unemployed.
People who are neither employed nor unemployed are not in the labor force.
The sum of employed and unemployed people
makes up the labor force
The official unemployment rate has often been cited as being too restrictive and not representative of the true breadth of
problems. Some analysts contend that the official unemployment measure is too broad and would like a more narrowly targeted measure; however, they are the minority. This group is outnumbered by those who believe the unemployment rate is too narrowly defined.
In 1976, the BLS, under the direction of Commissioner Julius Shiskin, introduced a range of labor market measures, entitled U-1 through U-7. In 1995, following the redesign of the CPS in the previous year, the BLS introduced a new range of alternative measures of labor underutilization. Regular publication of these measures commenced with the Feb. 1996
The measures range from U-1, which is the most restrictive since it only includes those people who were jobless for at least 15 weeks, to U-6, the broadest definition of labor underutilization. The U-3 measure is the official unemployment rate. Measure U-1 and Measure U-2 are more restrictive and therefore lower than U-3, while U-4, U-5, and U-6 are higher than U-3.
The U-6 measure provides the broadest measure of labor underutilization. The BLS defines it as the "total unemployed, plus all persons marginally attached to the labor force, plus total employed part-time for economic reasons, as a percent of the
plus all persons marginally attached to the labor force."
Marginally attached workers are defined as persons without jobs who are not currently looking for work (and hence not considered unemployed), but who have demonstrated some degree of labor force attachment. To be included in this category, individuals must indicate they currently want a job, have looked for work in the last 12 months, and are available for work.
One subset of the marginally attached group is called
Discouraged workers are those who are not currently looking for work for these reasons:
They believe no job is available in their line of work
Consider the following hypothetical cases as examples of how the official unemployment rate (U-3) understates the magnitude of the labor underutilization problem:
A single mother who has been unemployed for three months but was unavailable for work for the past two weeks to care for her sick child would be classified as "not in the labor force." She would be excluded from the U-3 measure but would be included in the U-6 measure.
A 60-year-old former executive who lost their job in a
a year ago is keen to return to the workforce; however, after sending out more than 100 resumes in the first three months of unemployment, they are discouraged because they have not received an interview call or acknowledgment letter; as a result, they stopped their job-hunting efforts. They would be excluded from the U-3 measure but would be included in the U-6 measure.
The unemployment rate is the current portion of the labor force that is without work. The Bureau of Labor Statistics maintains
going back to 1948. The unemployment rate in the U.S. as of July 2023 is 3.5%.
South Africa has the highest unemployment rate in the world, with unemployment at 33.5% as of 2022. Estimates for 2023 also place it in the first position, with an estimated unemployment rate of 34.7%.
There are many theories on how to reduce unemployment. Implementing an expansionary monetary policy, which reduces interest rates, making goods and services cheaper, increases demand, which causes businesses to increase production, which requires them to hire more people, is one strategy. Other methods can include expanding apprenticeship programs,...
- Elvis Picardo
Feb 22, 2009 · In May 2020, Canada’s unemployment rate reached 13.7 per cent. This is estimated to be the highest recorded rate of unemployment since comparable data became available in 1976. The labour market gradually recovered and in February 2022 the unemployment rate fell below its pre-Covid-19 level at 5.5%.
Oct 8, 2024 · The unemployment rate is the percentage of the labor force without a job. It is a lagging indicator and generally rises or falls with changing economic conditions. Key Takeaways.
Mar 4, 2021 · While the unemployment rate is an important economic indicator, it doesn't capture the full scope of unemployment and underemployment. Former Fed Chair Janet Yellen noted the disparity between real unemployment and the unemployment rate in 2017 when she said, "A broader measure of unemployment isn't quite back to its pre-recession level.
- Kimberly Amadeo
Feb 18, 2021 · The unemployment rate soared from a 50-year low of 3.5 percent to 14.8 percent in April 2020 at the beginning of the COVID-19 pandemic, and then fell faster than many forecasters anticipated, to 6 ...
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Oct 8, 2024 · Unemployment is a key indicator of the health of an economy. A low unemployment rate represents a strong economy while a high unemployment rate represents a weak economy. Article Sources.
