For any economy, the unemployment rate is a key metric for measuring the health of its job market and economy. The unemployment rate is a measure of the number of people out of work and looking for jobs, and is calculated by the Bureau of Labor Statistics (BLS) through a monthly survey that asks households whether their members are employed or seeking employment. It’s widely quoted in the media and other news sources in the United States and is one of the most closely watched economic indicators.
High, persistent unemployment negatively impacts the economy as a whole by reducing disposable incomes and depressing morale, leading to decreased consumer spending and slowing economic growth. When unemployment is low, it is a sign that the economy is operating close to its full capacity and can generate more jobs for workers and families.
The official unemployment rate – the U-3 metric – is based on a monthly survey that identifies all employed and unemployed workers. This excludes those who have dropped out of the workforce or are no longer actively searching for a job, such as retirees or discouraged workers. It also excludes those who are working part time but would prefer to be full-time employees if given the opportunity. This group is called the marginally attached.
The BLS also produces a more comprehensive estimate of unemployment, the U-6 metric, which includes the official unemployment rate plus discouraged workers and the marginally attached. A newer metric, the JOLTS series, also tracks broader measures of labor underutilization including the total number of people working part time for economic reasons or because they cannot find full-time jobs.