Unemployment rate is a key economic indicator that tells us how healthy or unhealthy the economy is. It measures the percentage of people who are unemployed and looking for work, as a share of total working-age adults.
The government collects this data from a large sample survey of households each month. There is a small chance that the sample estimates will differ from the actual population values. However, this is very unlikely and there is a good chance that the results will be very close.
There are a number of different ways to measure unemployment. The most widely cited is the U-3 number, released monthly by the Bureau of Labor Statistics. This measures the number of unemployed people who have been jobless for 15 weeks or longer, plus those who have recently lost their jobs and those who have completed temporary work but want a permanent job. It also includes the number of discouraged workers – those who have given up their search for employment because they believe that there are no jobs available to them.
In general, most modern economists agree that a rate of about 5% is “full employment,” meaning there are enough jobs available to meet demand at the price level desired by employers. This level of unemployment prevents inflation, allows workers to move between jobs when needed, and provides opportunities for those wanting full-time work to find it.
High unemployment rates have a wide range of negative consequences, including reducing consumer spending, which drives about 70% of GDP growth. They also increase reliance on social welfare programs and reduce tax revenue, which can weaken government finances. In addition, they decrease family incomes and can cause communities to break apart, which in turn can lead to greater levels of poverty, crime, and social unrest.