An important economic indicator, the unemployment rate measures the number of jobless people in a country’s labor force. It is a percentage of the total labor force, which includes both those who are employed and those looking for work. The government estimates its jobless numbers by conducting monthly interviews with households, referred to as the Current Population Survey (CPS). The survey asks about the industry and occupation of each person’s last job, the reason for their unemployment, and how they are looking for a new job. Data on those who are not considered part of the labor force, such as students and stay-at-home parents, is also collected.
There are six different measures of unemployment, with U-3 being the most commonly reported. However, the most useful measure may be U-6, which includes discouraged workers as well as those who want to work but can’t because of family or other responsibilities. This gives a more accurate picture of the true state of the labor market.
Unemployment rates are influenced by many factors, including changes in technology and demographic shifts. For example, technological advances can make some older industries obsolete, causing companies to lay off workers. This is a form of structural unemployment, and it can occur even without explicit government intervention. A high level of unemployment can have negative consequences for individuals, families, and the economy as a whole. It can make it difficult for consumers to buy goods and services, and it can erode the skills of workers who are laid off.