The unemployment rate is a key economic indicator and draws attention from the media, especially during recessions or challenging times for the economy. Unemployment impacts those who are jobless, but it also erodes disposable income for families, depresses worker morale and slows economic output. The unemployment rate is not the only factor to consider when looking at the health of a country’s labor market, however. The underemployment rate is an important measure that reflects the extent to which workers are underutilized and would like to work more hours.
The U-3 unemployment rate is the official statistic reported by the Bureau of Labor Statistics (BLS), a division of the Department of Commerce. It is based on a monthly survey in which approximately 60,000 households are asked if their members have jobs or are looking for employment. Individuals are counted as being employed or unemployed if they have done some work for pay in the past four weeks and are currently available to do so. Individuals who are not in the labor force, are discouraged from seeking employment or are institutionalized are excluded from the figure.
Ideally, economists believe that there should be some level of unemployment, which prevents inflation, allows individuals to move between jobs or attend school and improve their skills, and helps the economy weather cyclical contractions such as recessions. However, a low level of unemployment is difficult to achieve. During a recession, the unemployment rate rises because people lose their jobs and are unable to find new ones. In addition, workers may become discouraged and give up on seeking employment, which causes them to leave the labor force.
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