Unemployment rate is one of the most commonly used indicators of the health of the economy and job market. It measures the percentage of the labor force (the total number of people either working or looking for jobs) that is unemployed. The unemployment rate does not include those who have dropped out of the labor force, are retired or have family responsibilities that prevent them from seeking work. The government uses a monthly survey to collect the data that is used to calculate the unemployment rate.
The survey is designed to be as accurate as possible, and it requires interviewers to make many practical judgement calls about what constitutes a job and how much paid work people need to undertake in order to be considered employed. For example, if someone works part-time but would like to have more hours or is temporarily unavailable for work, the survey considers them to be underemployed.
High levels of unemployment can have a negative effect on the economy, as it reduces consumer spending. It also has an impact on those workers who have a job but are looking for another, as they may become discouraged and stop searching. This can lead to a downward spiral, where the unemployment rate rises and consumers spend less, which in turn leads to more job losses and so on.
LISEP has developed the True Rate of Unemployment to provide analysts and policymakers with a more comprehensive measure of the state of the job market. It draws on data compiled by the Bureau of Labor Statistics and the Current Population Survey, which is conducted monthly in the United States.
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