The unemployment rate is one of the best-known labor market indicators. It’s calculated as the percentage of people who are unemployed as a share of the total workforce. This rate is important because it provides insights into the health of an economy’s labor markets, allowing us to see whether companies can hire workers at competitive wages or whether people can find employment.
The official government unemployment rate — which is reported monthly — only counts Americans who are out of work and looking for a job. It leaves out discouraged workers, who are no longer looking for jobs because they’ve given up hope. It also excludes part-time workers who would like to have full-time employment, and it ignores those who are working but whose hours have been cut back or have left the workforce entirely.
Fortunately, there are several disaggregated metrics that provide a more complete picture of the job market, including the U-3 unemployment rate and the U-6 underemployment rate. EPI follows a variety of these indicators in its companion website, Economy Track.
The U-3 unemployment rate is the most commonly used measure of unemployment, and it measures the number of unemployed people as a percentage of the total labor force. It’s based on information collected by the Current Population Survey, which has been conducted monthly since 1940. The survey samples households of about 60,000 eligible adults and asks them about their job status and other economic and demographic characteristics. The Bureau of Labor Statistics uses the results to produce the nation’s official unemployment rate.