Unemployment is one of the most closely watched indicators of economic health. It can have a big impact on stocks and consumer prices, two key measures of the overall economy.
The unemployment rate is the percentage of people in the labor force who are jobless and actively looking for work. The Bureau of Labor Statistics calculates this figure based on a monthly survey that asks households questions about their employment status. The survey counts part-time workers as employed, but excludes those who have given up on their search for a job or have been able to find work but don’t earn enough to meet their living expenses. The survey is conducted by trained interviewers who call on a random sample of households each month. The number of households contacted may seem small compared to the population at large, but it is very large compared to most other surveys.
Many people assume that the government uses unemployment insurance (UI) claims to measure the number of unemployed, but UI claims only count those who have actually applied for benefits. This is a significant limitation, because some jobless people don’t apply for UI or don’t qualify for benefits.
Other problems with measuring the number of jobless include people who say they want a job but have been discouraged or have given up on their search. The comprehensive jobless rate (or U-5b) is designed to address these issues by counting all adults and adolescents who want a job but have been unable to find one or are working at less than their full-time, normal wage.