Unemployment Rate

The unemployment rate is the proportion of the labor force not working. It does not include people who are able to work but are not willing to do so, such as discouraged workers. A discouraged worker is an unemployed person who is not currently looking for work because they believe no jobs are available for them or there are no jobs for which they would qualify. The unemployment rate also does not consider the underemployed: people in the labor force not receiving employment that matches their education or utilizes their skills. The official unemployment rate is often calculated by the federal government (e.g., the Bureau of Labor Statistics—BLS, a government agency that tracks changes in labor in an effort to improve the economy in the United States) over portions of time, such as a year or a quarter of a year. This statistic is used to evaluate how an economy is doing. It is also used to see whether the economy is experiencing a recession, or an economic decline over a period of time. To obtain a fuller picture of unemployment, it is important to consider not only the number and proportion of discouraged workers and underemployed workers, but also the number and proportion of involuntary part-time workers; that is, workers who seek full-time work but can only find part-time work. For instance, around the holidays an individual seeks employment at a department store and is offered part-time work because the department store is only hiring needed labor for a short period of time. Often, workplaces hire more part-time workers to avoid the added cost of health insurance and other benefits. In a period of strong economic expansion, both of these categories are likely to diminish as the people in them take up full-time employment. Unemployment rates are measured differently in different countries. In the United States, the Bureau of Labor Statistics analyzes monthly surveys to make an estimate of the number of employed persons. They are categorized in many different ways. U3 is the official unemployment rate, which counts only the people who are not working and actively looking for work, while U6 adds the people who are marginally attached to the labor force which includes discouraged workers and the number of people who are part-time workers for economic reasons. Because it would be impossible to ask every citizen each month if they were employed or unemployed, the BLS makes an estimate. Some other countries use a total count, based on applications for welfare payments or registration at employment agencies, while others use a sophisticated sampling technique in which a small proportion of the population is surveyed. Differences in measurement between countries make cross-country comparisons of unemployment rates difficult.

Unemployment rates can be calculated for specific groups of the labor force so that problems faced by various categories of workers can be identified and addressed by policymakers. Government statisticians often distinguish between the overall unemployment rate and the unemployment rate for young workers (ages 16–24), the unemployment rate for adult men between age 25 and the national retirement age, the unemployment rates for men and women, and unemployment rates for ethnic minorities. Policies to address unusually high rates of unemployment differ, for example, between those designed to help young workers (typically, more education and training opportunities) and those aimed at promoting employment for those in the 25–65 age group, who are more likely to be suffering from cyclical unemployment (unemployment that rises and falls as as a result of the business cycle) or structural unemployment (unemployment caused by long-term changes in the structure of the economy). The BLS calculates unemployment for workers ages 16–19 in the United States. In November 2017 this rate was 14.2%, reflecting a lack of jobs for which these workers have the necessary skills.

Policymakers also distinguish between short-term unemployment, which tends to be frictional, and long-term unemployment, defined in the United States as 27 or more weeks without a job. Long-term unemployment is likely to be cyclical—in the case of a particularly bad recession—or structural—a redundant worker from a factory that has moved abroad or replaced workers with robots. During the Great Recession, the period of economic decline in the U.S. from 2007 to 2013, the problem was not only an increase in unemployment but also an increase in the duration of unemployment. Long-term unemployment spiked from just over 1% in 2003 to 4.4% in 2011.

In periods of economic decline or stagnation (a period of lack of growth or development), such as the 2007–2009 economic crisis, some workers who can not find a job lose their unemployed status when they give up and leave the labor force altogether. People who are unemployed and give up looking for work are called discouraged workers. This category includes workers who are not currently looking for work because they believe no jobs are available for them or that there are no jobs for which they would qualify. Discouraged workers are not considered part of the labor force. In the United States, the BLS counts discouraged workers as those workers who are marginally attached to the labor force in that they want work, are available for work, and have looked for a job at some time in the previous 12 months but are not counted as unemployed because they have not searched for work in the four weeks prior to being surveyed.