Unemployment rate is a key statistic in determining the health of the economy and the labor market. There are a variety of ways to calculate the unemployment rate, however most people are familiar with the official headline number published by the Bureau of Labor Statistics.
The unemployment rate is determined by dividing the number of jobless workers by the total population over the age of 16. People who have jobs and are looking for work make up the labor force; those without jobs but who are available to work are considered unemployed.
Those who have retired, are unable to work due to illness or caregiving obligations or have simply decided not to work for any reason are considered out of the workforce. It is important to note that not all people who are out of the workforce want or are able to find employment and they may be just waiting for the right opportunity to present itself.
High unemployment can have a devastating impact on society. It can cause many to lose hope and become discouraged in their job searches, which can lead to a vicious cycle of low productivity and reduced spending by consumers. Additionally, high unemployment can negatively affect the health of the overall economy because about 70% of GDP comes from consumer spending.
There are a variety of other indicators that can give insight into the state of the labor market, such as underemployment, which is the more holistic measure that includes those who have jobs but feel “underutilized” or stuck in lower-wage occupations. This broader measure can help us better understand the impact of the pandemic on the economy and is one that EPI tracks closely on Economy Track.