What Is the Unemployment Rate?

The unemployment rate is the percent of the labor force that is jobless. It is a lagging indicator, meaning that it generally rises or falls in the wake of changing economic conditions, rather than anticipating them. When the economy is in poor shape and jobs are scarce, the unemployment rate can be expected to rise. When the economy is growing at a healthy rate and jobs are relatively plentiful, it can be expected to fall.聽

In the U.S., the U-3 rate, which the Bureau of Labor Statistics (BLS) releases as part of its monthly employment situation report, is the most commonly cited national rate. It is not the only metric available, and measures unemployment fairly narrowly. The more comprehensive U-6 rate is an alternative measure of unemployment that includes groups such as discouraged workers, who have stopped looking for a new job, and the underemployed, who are working part time because they can't find full time work.锘柯

Key Takeaways

  • The unemployment rate is the proportion of the labor force that is not currently employed but could be.
  • There are six different ways the unemployment rate is calculated by the Bureau of Labor Statistics using different criteria.
  • The most comprehensive statistic reported is called the U-6 rate, but the most widely used and cited is the U-3 rate.

Calculating the Unemployment Rate

The official unemployment rate is known as U-3. It defines unemployed people as those who are willing and available to work, and who have actively sought work within the past four weeks.锘 Those with temporary, part-time, or full-time jobs are considered employed, as are those who perform at least 15 hours of unpaid family work.

To calculate the unemployment rate, the number of unemployed people is divided by the number of people in the labor force, which consists of all employed and unemployed people. The ratio is expressed as a percentage.

U-3=UnemployedLabor聽Force100\begin{aligned} &\text{U-3} = \frac { \text{Unemployed} }{ \text{Labor Force} } \times 100 \\ \end{aligned}U-3=Labor聽ForceUnemployed100

Unemployment Rate (seasonally adjusted)

Many people who would like to work but cannot (due to a disability, for example), or have become discouraged after looking for work without success, are not considered unemployed under this system; since they are not employed either, they are categorized as outside the labor force.锘 Critics see this approach as painting an unjustifiably rosy picture of the labor force. U-3 is also criticized for making no distinction between those in temporary, part-time, and full-time jobs, even in cases where part-time or temporary workers would rather work full-time but cannot due to labor market conditions.

The unemployment rate is seasonally adjusted to account for predictable variations, such as extra hiring during the holidays.锘 The BLS also provides the unadjusted rate:

Unadjusted

Alternative Measures

In response to concerns that the official rate does not fully convey the health of the labor market, the BLS publishes five alternative measures: U-1, U-2, U-4, U-5, and U-6. Though these are often referred to as unemployment rates (U-6, in particular, is often called the "real" unemployment rate), U-3 is technically the only unemployment rate. The others are measures of "labor underutilization."锘柯

U-1

People who have been unemployed for 15 weeks or longer, expressed as a percentage of the labor force.

U-1=Unemployed聽15+聽WeeksLabor聽Force100\begin{aligned} &\text{U-1} = \frac { \text{Unemployed 15+ Weeks} }{ \text{Labor Force} } \times 100 \\ \end{aligned}U-1=Labor聽ForceUnemployed聽15+聽Weeks100

U-2

People who lost their jobs, or whose temporary jobs ended, as a percentage of the labor force.

U-2=Job聽LosersLabor聽Force100\begin{aligned} &\text{U-2} = \frac { \text{Job Losers} }{ \text{Labor Force} } \times 100 \\ \end{aligned}U-2=Labor聽ForceJob聽Losers100锘柯

U-4

Unemployed people, plus discouraged workers, as a percentage of the labor force (plus discouraged workers).

U-4=Unemployed+Discouraged聽WorkersLabor聽Force+Discouraged聽Workers100\begin{aligned} &\text{U-4} = \frac { \text{Unemployed} + \text{Discouraged Workers} }{ \text{Labor Force} + \text{Discouraged Workers} } \times 100 \\ \end{aligned}U-4=Labor聽Force+Discouraged聽WorkersUnemployed+Discouraged聽Workers100

Discouraged workers are those who are available to work and would like a job, but have given up actively looking for one. This category includes people who feel they lack the necessary qualifications or education, who believe there is no work available in their field, or who feel they are too young or old to find work. Those who feel unable to find work due to discrimination also fall under this category.锘 Note that the denominator鈥攏ormally labor force鈥攊s adjusted to include discouraged workers, who are not technically part of the labor force.

U-5

Unemployed people, plus those who are marginally attached to the labor force, as a percentage of the labor force (plus the marginally attached).

U-5=Unemployed+Marginally聽AttachedLabor聽Force+Marginally聽Attached100\begin{aligned} &\text{U-5} = \frac { \text{Unemployed} + \text{Marginally Attached} }{ \text{Labor Force} + \text{Marginally Attached} } \times 100 \\ \end{aligned}U-5=Labor聽Force+Marginally聽AttachedUnemployed+Marginally聽Attached100

People who are marginally attached to the labor force include discouraged workers and anyone else who would like a job and has looked for one in the past 12 months but have given up actively searching.锘 As with U-4, the denominator is expanded to include the marginally attached, who are not technically part of the labor force.

U-6

Unemployed people, plus people who are marginally attached to the labor force, plus those who are employed part-time for economic reasons, as a percentage of the labor force (plus marginally attached).

U-6=Unemployed+MA+PTERLabor聽Force+MA100where:MA=marginally聽attachedPTER=part-time聽for聽economic聽reasons\begin{aligned} &\text{U-6} = \frac { \text{Unemployed} + \text{MA} + \text{PTER} }{ \text{Labor Force} + \text{MA} } \times 100 \\ &\textbf{where:} \\ &\text{MA} = \text{marginally attached} \\ &\text{PTER} = \text{part-time for economic reasons} \\ \end{aligned}U-6=Labor聽Force+MAUnemployed+MA+PTER100where:MA=marginally聽attachedPTER=part-time聽for聽economic聽reasons

This metric is the BLS' most comprehensive. In addition to the categories included in U-5, it accounts for people who have been forced to settle for part-time work even though they want to work full-time. This category is often referred to as "underemployed," although that label arguably includes full-time workers who are overqualified for their jobs.锘 The denominator for this ratio is the same as in U-5.

Unemployment Rates (seasonally adjusted)

How Is Unemployment Data Collected?

Official U.S. employment statistics are produced by the BLS, an agency within the Department of Labor. Every month the Census Bureau, part of the Department of Commerce, conducts the Current Population Survey using a sample of around 60,000 households, or around 110,000 individuals. The survey collects data on individuals in these households by race, ethnicity, age, veteran status, and gender, all of which鈥攁long with geography鈥攁dd nuance to the employment data. The sample is rotated so that 75% of the households are constant from month to month and 50% are from year to year. Interviews are conducted in-person or by phone.

The survey excludes individuals under the age of 16 and those who are in the Armed Forces (hence references to the "civilian labor force"). People in correctional facilities, mental healthcare facilities, and other similar institutions are also excluded. Interviewers ask a series of questions that determine employment status, but do not ask whether respondents are employed or unemployed. Nor do the interviewers themselves assign employment status; they record the answers for the BLS to analyze. Interviewers also collect information on industry, occupation, average earnings, union membership and鈥攆or the jobless鈥攚hether they quit or were discharged (fired or laid off).

Where to Find the Unemployment Rate

The unemployment rate is reported on the first Friday of every month for the preceding month. The and are available via the BLS' website. nba腾讯体育直播ers can showing any of the labor market measures named above for a specified date range.

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Unemployment Rate