The unemployment rate is calculated by dividing the number of unemployed by the total number of civilian workers. According to the Bureau of Labor Statistics, not everyone without a job necessarily is unemployed. You must not only be unemployed, but also have actively sought work over the last four weeks to be included in the unemployment rate. You are still counted if you have been temporarily laid off, and you are waiting to get called back to your job. You are not included in the unemployment rate if you have given up searching for a job. Some people believe that the true unemployment rate is higher because it includes discouraged workers. 1
Note:
See Current Unemployment Statistics for the latest U.S. rate. Employment Statistics contains the latest employment statistics.
The BLS reports the unemployment rate on the first of every month. 2 You can compare the unemployment rate of this month to the rate of last month, or to the rate of the year before, to eliminate the effects of season unemployment. The unemployment rate could be higher if you compare it to the previous month. For example, a school year’s end. This might not be a trend.
How Unemployment Affects U.S. Economic Growth
The unemployment rate is a good indicator of the level of joblessness. It’s a good indicator of economic growth.
The unemployment rate is a leading indicator . It measures the impact on economic events such as recessions. It is only after the recession begins that the unemployment rate will rise. This means that the unemployment rate continues to rise, even when the economy starts to recover.
When the economy is bad, employers are hesitant to fire people. Large companies can spend months putting together a plan for layoffs. The companies are more reluctant to hire workers until the economy is in the expansion phase. 2 In May 2008, the unemployment rate reached 5.4%. The unemployment rate peaked at 10.0% after the recession in October 2009.
The unemployment rate confirms what other indicators already show. If, for example, the other indicators indicate an expanding economy and , but the unemployment rate is decreasing, you can be sure that businesses are confident to begin hiring again. See the U.S. Unemployment Rate by year to see how it works.
Note:
When setting monetary policies, the Federal Reserve looks at the unemployment rate as an important indicator.
Investors can also look at current unemployment statistics and see which sectors are losing more jobs. The mutual funds can be sold based on the sector.
The unemployment rate is a useful economic indicator but it does not capture the full extent of unemployment or underemployment. Janet Yellen, former Fed chair, noted in 2017 the disparity between the real unemployment rate and the unemployment rates when she stated that “a broader measure is not quite back to the pre-recession levels.” This includes people who have not been motivated to search for a job and those who work part-time, but would prefer full-time employment. “6
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Underemployment can be defined as a situation where you have a college degree but are unable to find a job within your field of interest. Underemployment would occur if an economics major took a job as a dishwasher while they searched for a job in economics. This person would not be included in unemployment rates.
How Unemployment Affects Your Life
If unemployment increases, you can tell by the year-over-year change in unemployment. Retail will suffer if more people look for jobs. If you’re unemployed, you can also see how competitive you are and how much you could negotiate for a job.
The government may extend unemployment benefits in order to stop the recession from worsening. 7 The use of monetary policy is another way to reduce unemployment. For more information, visit Unemployment Solution.
The unemployment rate is an important component of the misery indice. The inflation rate is also a critical component. If the misery index is above 10%, then it indicates that people are suffering from either a recession or galloping inflation.
FAQs (Frequently Asked Questions)
What is the current rate of unemployment?
The Bureau of Labor Statistics provides a graph with monthly updated unemployment data. The drop-down menu allows you to sort the data according to age, reason for unemployment and more.
What was the unemployment during the Great Depression like?
In 1933, the unemployment rate reached a peak of nearly 25%. wages for those who were still employed fell an average of 42.5% from 1929 to 1933.
