In the United States, the unemployment rate is a statistic that is closely watched to measure the health of the economy and job market. The Bureau of Labor Statistics calculates the unemployment rate each month through a survey that asks a sample of households whether or not their members have jobs or are looking for work. This data is then compared to other economic statistics to help determine the state of the nation’s employment situation.
A high unemployment rate has a negative effect on the economy as a whole, and is often considered a leading indicator of a recession. When people are out of work, they lose the income that they would have earned from a job and are unable to spend money on goods and services. This reduces the demand for those goods and services, and ultimately leads to lower business profits and more layoffs. In the worst cases, the recession can become a vicious cycle that continues until outside forces intervene to create jobs or push back unemployment.
In addition to the official unemployment rate, the BLS also publishes a variety of other measures of labor underutilization. These include U-1, which only includes people who have been out of work for 15 weeks or more; the more broad-based U-3, which counts those without a job as well as those who have actively searched for work in the past four weeks; and the more comprehensive U-5, which adds in discouraged workers and those who have given up searching altogether.