The unemployment rate is an economic measure of labor underutilization, a sign that the economy is struggling to find work for people who want to work. It’s determined by dividing the number of unemployed individuals by the total labor force, which includes employed and jobless people. The unemployment rate is determined by a monthly survey of households conducted by the Census Bureau and overseen by the Department of Labor. It is typically published the last Tuesday of each month.
When a country experiences high unemployment, it can have negative implications on society, the economy and the individuals involved. The most obvious effect is that those without jobs lose their purchasing power, which can drive businesses to lay off workers or to reduce working hours as a cost-saving measure. This can create a vicious cycle that leads to reduced production, more unemployment, and even greater loss of purchasing power.
The unemployment rate is also often distorted by factors that are outside the control of government, such as the decision of some people to drop out of the labor force. This can occur for a variety of reasons, including retirement, health-related issues or family caregiving concerns. Other measures of unemployment exist, which try to more accurately reflect the state of the labor market. For example, the BLS’s broadest measure, U-6, counts all unemployed people and those who are marginally attached to the labor force (including discouraged workers) as a percentage of the total labor force.