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Unemployment Friday: What Is The Jobs Report?

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  • Unemployment Friday: What Is The Jobs Report?



    What Is the Unemployment Rate?


    The unemployment rate is the share of the labor force that is jobless, expressed as a percentage. It is a lagging indicator, meaning that it generally rises or falls in the wake of changing economic conditions, rather than anticipating them. When the economy is in poor shape and jobs are scarce, the unemployment rate can be expected to rise. When the economy is growing at a healthy rate and jobs are relatively plentiful, it can be expected to fall.


    In the U.S., the U-3 rate, which the Bureau of Labor Statistics (BLS) releases as part of its monthly employment situation report, is the most commonly cited national rate. It is not the only metric available, however, and it receives criticism for giving the impression that the labor market is healthier than alternative measures would indicate. For this reason, some observers prefer to track the more comprehensive U-6 rate (see below).

    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.



    Calculating the Unemployment Rate


    The official unemployment rate is known as U-3. It defines unemployed people as those who are willing and available to work, and who have actively sought work within the past four weeks. Those with temporary, part-time, or full-time jobs are considered employed, as are those who perform at least 15 hours of unpaid family work.

    To calculate the unemployment rate, the number of unemployed people is divided by the number of people in the labor force, which consists of all employed and unemployed people. The ratio is expressed as a percentage.


    \begin{aligned} &\text{U-3} = \frac { \text{Unemployed} }{ \text{Labor Force} } \times 100 \\ \end{aligned}​U-3=Labor ForceUnemployed​×100​


    Unemployment Rate (seasonally adjusted)
    Many people who would like to work but cannot (due to a disability, for example), or have become discouraged after looking for work without success, are not considered unemployed under this system; since they are not employed either, they are categorized as outside the labor force. Critics see this approach as painting an unjustifiably rosy picture of the labor force. U-3 is also criticized for making no distinction between those in temporary, part-time, and full-time jobs, even in cases where part-time or temporary workers would rather work full-time but cannot due to labor market conditions.

    The unemployment rate is seasonally adjusted to account for predictable variations, such as extra hiring during the holidays. The BLS also provides the unadjusted rate:

    Unadjusted
    Alternative Measures


    In response to concerns that the official rate does not fully convey the health of the labor market, the BLS publishes five alternative measures: U-1, U-2, U-4, U-5, and U-6. Though these are often referred to as unemployment rates (U-6, in particular, is often called the "real" unemployment rate), U-3 is technically the only unemployment rate. The others are measures of "labor underutilization."
    U-1


    People who have been unemployed for 15 weeks or longer, expressed as a percentage of the labor force.

    \begin{aligned} &\text{U-1} = \frac { \text{Unemployed 15+ Weeks} }{ \text{Labor Force} } \times 100 \\ \end{aligned}​U-1=Labor ForceUnemployed 15+ Weeks​×100​
    U-2


    People who lost their jobs, or whose temporary jobs ended, as a percentage of the labor force.

    \begin{aligned} &\text{U-2} = \frac { \text{Job Losers} }{ \text{Labor Force} } \times 100 \\ \end{aligned}​U-2=Labor ForceJob Losers​×100​
    U-4


    Unemployed people, plus discouraged workers, as a percentage of the labor force (plus discouraged workers).

    \begin{aligned} &\text{U-4} = \frac { \text{Unemployed} + \text{Discouraged Workers} }{ \text{Labor Force} + \text{Discouraged Workers} } \times 100 \\ \end{aligned}​U-4=Labor Force+Discouraged WorkersUnemployed+Discouraged Workers​×100​

    Discouraged workers are those who are available to work and would like a job, but have given up actively looking for one. This category includes people who feel they lack the necessary qualifications or education, who believe there is no work available in their field, or who feel they are too young or old to find work. Those who feel unable to find work due to discrimination also fall under this category. Note that the denominator—normally labor force—is adjusted to include discouraged workers, who are not technically part of the labor force.

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