The unemployment rate, which the government releases monthly, is one of the most important indicators of an economy’s health. It’s a major factor when setting monetary policy and making strategic economic decisions. During the Great Recession, the unemployment rate climbed above 10 percent, the highest level in decades. The information gathered on the number of unemployed individuals, their skill levels, and other aspects of unemployment allows economists and policymakers to better understand the cause of high unemployment and find ways to remedy it.
The official unemployment rate is measured by a monthly survey of households conducted for the Bureau of Labor Statistics. To qualify for the count, individuals must not only be without a job, but also actively seeking work by contacting prospective employers, visiting employment agencies, or sending out resumes. This weeds out people who may be nearing retirement age and who choose to stop looking for jobs, or those who have lost their jobs through no fault of their own.
There are some important caveats to consider when considering the meaning of unemployment. For example, a sales executive who has been unable to land a full-time position and has bills to pay decides to accept a three-month contract that requires him to work six hours per week is not technically unemployed under the current definition of the unemployment rate (U-3). This person is considered to be “underemployed” under the U-6 measure.
There are many other economic and social factors that influence unemployment. These include the normal pattern of companies expanding and contracting their workforces in a dynamic economy, social and economic forces that affect the willingness of people to work or the ability of businesses to hire, and public policies that impact both.