The unemployment rate is a key measure of the health of an economy. It’s a ratio of the number of people who are unemployed to the total working-age population. It is a key economic indicator because when people are unemployed, they are unable to consume goods and services and contribute to the economy.
The official rate is calculated by the Bureau of Labor Statistics through a monthly survey of individuals. The survey asks whether they are employed, looking for work, or not in the workforce for various reasons. Some experts criticize the way the unemployment rate is measured because it excludes workers who are no longer searching for a job, but may be too discouraged to keep trying or are simply “between jobs.” They argue that these individuals should be included in the calculation of the unemployment rate.
Currently, the official unemployment rate is 3.8%. But the number of Americans employed is 5.5 million below its pre-pandemic trend. This is because the government-imposed lockdowns have forced many Americans to drop out of the workforce. The unemployment rate reflects this, as well as the depressed labor force participation rate.
The government tries to address this issue by creating a separate statistic called the JOLTS survey (Jobs, Openness to Hire). But it is difficult to interpret the results because only those who are actively looking for work are counted as part of the workforce. This means that the percentage of adults who are not working is much higher than the official unemployment rate suggests.
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