A country’s unemployment rate is an important gauge of the health of its economy and job market. Unemployment rates are calculated through a monthly survey conducted by the Bureau of Labor Statistics. The rate counts those who do not have jobs and are actively seeking employment, excluding those who have given up looking for work or have retired.
While economists, academics and policymakers have argued about the causes of and remedies for unemployment, most accept that it is a natural part of an economy’s cycle. Most agree that an unemployment rate below 5% is considered full employment, which allows workers to shift between different types of work, avoids inflation and gives people time to upgrade their skills and find more fulfilling careers.
There are many ways to calculate an unemployment rate, and the overall picture can vary depending on which metrics are being used. The most widely used measure is called U-3 and includes people who are unemployed, discouraged workers and those working part-time but would prefer to have more hours. A more comprehensive metric is called U-6 and adds involuntary part-time workers, those who are underemployed (who want full-time work but must settle for less than that) and marginally attached workers.
A high unemployment rate can have a profoundly negative impact on an individual, their family and society at large. It can lead to depression, sleep problems, anxiety, feelings of helplessness and despair, increased drinking and poor physical health. The loss of income can also strain a household’s budget, leading to financial difficulties and even bankruptcy for some families.