Unemployment rate how is it figured

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Understanding the Unemployment Rate. Unemployment and the Economy. Dictionary of Economic Terms A-F. Dictionary of Economic Terms G-Z. What Is Unemployment Rate? Key Takeaways The unemployment rate is the proportion of the labor force that is not currently employed but could be. There are six different ways the unemployment rate is calculated by the Bureau of Labor Statistics using different criteria.

The most comprehensive statistic reported is called the U-6 rate, but the most widely used and cited is the U-3 rate. Unemployment Rate seasonally adjusted. Unemployment Rates seasonally adjusted. What Are the Other Measures of U.

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Related Terms Underemployment Underemployment is a measure of employment and labor utilization in the economy that looks at how well the labor force is being utilized. Unemployment Definition and Types Unemployment is the term for when a person who is actively seeking a job is unable to find work. Discouraged Worker A discouraged worker is someone who is eligible for employment and can work, but who is currently unemployed and has not attempted to find employment.

This measure is the number of employed as a percentage of the civilian noninstitutional population 16 years old and over. In other words, it is the percentage of the population that is currently working. Each month, national summary statistics on unemployment and employment are published in a news release titled The Employment Situation.

The dates of release are announced in advance and made available on the BLS release calendar. Detailed information also is published in tables online and in numerous news releases and reports. Historical data series can be obtained from various database tools. Total employment and unemployment are higher in some parts of the year than in others. For example, unemployment is higher in January and February, when it is cold in many parts of the country and work in agriculture, construction, and other seasonal industries is curtailed.

Also, both employment and unemployment rise every June, when students enter the labor force in search of summer jobs.

The seasonal fluctuations in the number of employed and unemployed people reflect not only the normal seasonal weather patterns that tend to be repeated year after year, but also the hiring and layoff patterns that accompany regular events such as the winter holiday season and the summer vacation season.

These variations make it difficult to tell whether month-to-month changes in employment and unemployment are due to normal seasonal patterns or to changing economic conditions. To deal with such problems, a statistical technique called seasonal adjustment is used. This technique uses the past history of the series to identify the seasonal movements and to calculate the size and direction of these movements.

A statistical procedure is then applied to the estimates to remove the effects of regular seasonal fluctuations on the data. Seasonal adjustment eliminates the influence of these fluctuations and makes it easier for users to observe fundamental changes in the level of the series, particularly changes associated with general economic expansions and contractions.

Many of the monthly time series for major labor market indicators, especially those in the monthly Employment Situation report, are seasonally adjusted. There is only one official definition of unemployment—people who are jobless, actively seeking work, and available to take a job, as discussed above. The official unemployment rate for the nation is the number of unemployed as a percentage of the labor force the sum of the employed and unemployed.

Some have argued, however, that these unemployment measures are too restricted, and that they do not adequately capture the breadth of labor market problems. For this reason, economists at BLS developed a set of alternative measures of labor underutilization. These measures, expressed as percentages, are published every month in The Employment Situation news release.

They range from a very limited measure that includes only those who have been unemployed for 15 weeks or more to a very broad one that includes total unemployed, all people marginally attached to the labor force, and all individuals employed part time for economic reasons.

More information about the alternative measures is available on the BLS website. The CPS also is used to obtain detailed information on particular segments of the population and labor force. Generally, these "supplemental" inquiries are repeated annually or biennially in the same month and include topics such as annual earnings, income , and poverty of individuals and families published by the Census Bureau ; the extent of work experience of the population during the prior calendar year; the employment of school-age youth, recent high school graduates, and dropouts; job tenure; displaced workers; and veterans with a service-connected disability.

Some additional supplements that are unrelated to labor force issues, such as those on smoking and voting, also are conducted through the CPS, although they are not sponsored by BLS. Supplemental questions are asked following the completion of the regular monthly labor force questions.

Results of these special surveys usually are published in news releases and other BLS reports. The Local Area Unemployment Statistics LAUS program publishes monthly estimates of employment and unemployment for approximately 7, areas, including all states, counties, metropolitan areas, and cities of 25, population or more, by place of residence. These estimates are key indicators of current local economic conditions. BLS is responsible for the concepts, definitions, technical procedures, validation, and publication of the estimates that state government agencies prepare under agreement with BLS.

Because the CPS survey of 60, households nationwide is insufficient for creating reliable monthly estimates for statewide and substate areas, LAUS uses three different estimating procedures, each being the most appropriate for the level of geography being estimated. In general, estimates for the states are developed using statistical models that incorporate current and historical data from the CPS, the Current Employment Statistics CES program , and regular state unemployment insurance UI systems.

These model-based state estimates are also controlled in "real time" to sum to the not seasonally adjusted national monthly CPS totals. Model-based estimates are also developed for seven large substate areas and their respective balances of state. Estimates for the substate labor market areas are produced through a building-block approach known as the "Handbook method. Below the labor market area level, estimates are created for counties, cities, and towns above 25, population using disaggregation techniques based on inputs from the decennial census, annual population estimates, and current UI data.

Unlike the LAUS state and substate labor force estimates, which have multiple sources of inputs and are available on a monthly basis, the demographic labor force data from the Geographical Profile of Employment and Unemployment GP bulletins , also published by LAUS, are derived solely from the CPS and are issued annually.

National CPS data can be found on the Internet at www. State, city, county, and other local area employment and unemployment data are available on the Internet at www. Unemployment insurance UI programs are administered at the state level and provide assistance to jobless people who are looking for work.

Statistics on the insured unemployed in the United States are collected as a by-product of state UI programs. Workers who lose their jobs may file applications to determine if they are eligible for UI assistance. These applications are referred to as "initial claims. Data on initial and continuing UI claims are maintained by the Employment and Training Administration, an agency of the U.

While the UI claims data provide useful information, they are not used to measure total unemployment because they exclude several important groups. To begin with, not all workers are covered by UI programs.

For example, self-employed workers, unpaid family workers, workers in certain not-for-profit organizations, and several other small primarily seasonal worker categories are not covered.

In addition, the insured unemployed exclude the following: Unemployed workers who have exhausted their benefits. Unemployed workers who have not yet earned benefit rights such as new entrants or reentrants to the labor force. Disqualified workers whose unemployment is considered to have resulted from their own actions rather than from economic conditions; for example, a worker fired for misconduct on the job. Otherwise eligible unemployed persons who do not file for benefits.

Because of these and other limitations, statistics on insured unemployment cannot be used as a measure of total unemployment in the United States. Indeed, over the past decade, only about one-third of the total unemployed, on average, received regular UI benefits. UI claims data are widely used as an indicator of labor market conditions. Data users must be cautious, however, about trying to compare or reconcile the UI claims data with the official unemployment figures gathered through the CPS.

Even if one sets aside the major definitional limitations outlined above, there are comparability issues related to the distinct reference periods, methodologies, and reporting practices of the two data sources. More importantly, though, the weekly UI claims data reflect only people who became unemployed and do not take into account the number of unemployed people who found jobs or stopped looking for work.

The official unemployment figures from the CPS, on the other hand, represent the net result of overall movement into and out of unemployment in a given month. Changes in CPS estimates of total unemployment for any given month will tend to be far smaller than the sum total of weekly UI initial claimants over a month-long span. Menu Search button Search:. Where do the statistics come from?

What are the basic concepts of employment and unemployment? Who is counted as employed? Who is counted as unemployed?

Who is not in the labor force? What about cases of overlap? What are the unemployment rate, labor force participation rate, and employment-population ratio?

Where can people find the data? How are seasonal fluctuations taken into account? Is there only one official definition of unemployment? What other information is collected in the CPS? How is unemployment measured for states and local areas?

Where can people get more information? What do the unemployment insurance UI figures measure? The basic concepts involved in identifying the employed and unemployed are quite simple: People with jobs are employed. People who are jobless, looking for a job, and available for work are unemployed.

The labor force is made up of the employed and the unemployed. People who are neither employed nor unemployed are not in the labor force. For example, consider these fictional scenarios: Elena reported to the interviewer that last week she worked 40 hours as a sales manager for a beverage company. Individuals also are counted as employed if they have a job at which they did not work during the survey week, whether they were paid or not, because they were: On vacation Ill Experiencing child care problems On maternity or paternity leave Taking care of some other family or personal obligation Involved in a labor dispute Prevented from working by bad weather These people are counted among the employed and tabulated separately as with a job but not at work , because they have a specific job to which they will return.

Garrett is 16 years old, and he has no job from which he receives any pay or profit. Lisa spends most of her time taking care of her home and children, but she helps in her husband's computer software business all day Friday and Saturday. Actively looking for work may consist of any of the following activities: Contacting: An employer directly or having a job interview A public or private employment agency Friends or relatives A school or university employment center Submitting resumes or filling out applications Placing or answering job advertisements Checking union or professional registers Some other means of active job search Passive methods of job search do not have the potential to connect job seekers with potential employers and therefore do not qualify as active job search methods.

Some fictional examples of typical responses that may result in a person being classified as unemployed are: Yvonne reported that 2 weeks ago she applied for jobs at a bank and at a mortgage lending company.

She currently is waiting to hear back from both businesses. Yvonne is unemployed because she made a specific effort to find a job within the prior 4 weeks and is presently available for work. Jenkins tells the interviewer that her teenage daughter, Katherine Marie, was thinking about looking for work in the prior 4 weeks but knows of no specific efforts she has made.

Katherine Marie does not meet the activity test for unemployment and is, therefore, counted as not in the labor force. But the survey counts them as out of the labor force because they are not actively looking for work. Other people may tell the Census Bureau that they are ready to work and looking for a job but, truly, they are not that eager to work and are not looking very hard at all.

They are counted as unemployed, although they might more accurately be classified as out of the labor force. Still other people may have a job, perhaps doing something like yard work, child care, or cleaning houses, but are not reporting the income earned to the tax authorities.

They may report being unemployed, when they actually are working. Although the unemployment rate gets most of the public and media attention, economic researchers at the Bureau of Labor Statistics publish a wide array of surveys and reports that try to measure these kinds of issues and to develop a more nuanced and complete view of the labor market.

It is not exactly a hot news flash that economic statistics are imperfect. Even imperfect measures like the unemployment rate, however, can still be quite informative, when interpreted knowledgeably and sensibly. Improve this page Learn More. Skip to main content. Module 7: Macroeconomic Measures — Unemployment and Inflation.

Search for:. Calculating the Unemployment Rate Learning Objectives Calculate labor force percentages and the unemployment rate. Calculating the Unemployment Rate. Table 1. Employment and Unemployment, Total adult population over the age of 16 Calculating Labor Force Percentages So how do economists arrive at the percentages in and out of the labor force and the unemployment rate?

To determine the percentage in the labor force: Step 1. Step 2. Multiply by to obtain the percentage. Multiply by to obtain the rate. Try It. Labor Force Participation Rate. The Establishment Payroll Survey. How Is the U. Unemployment Data Collected? Criticisms of Measuring Unemployment There are always complications in measuring the number of unemployed.