Unemployment is an important economic indicator that is closely followed by investors, policymakers and the public. It is a key factor in assessing the health of the economy and has an important inverse relationship with stock market returns and inflation.
The unemployment rate is the percentage of people out of work and looking for a job divided by the total number of working-age adults in the labor force. It is calculated monthly by the Bureau of Labor Statistics (BLS) and published in early each month.
There are several different ways to calculate the unemployment rate. The most common is to divide the number of unemployed workers by the total number of working-age adults and multiply by 100. However, this measure only counts those who are currently unemployed and actively searching for a job. It does not include those who have stopped seeking employment for any reason or who are only employed part time but would like to be full-time (U-6).
Other measures of the labor market are more comprehensive and take into account cyclical and structural influences on participation. For example, a government might conduct household labor force surveys to collect data on those who are not in the workforce, or it might collect information from administrative records such as social insurance office statistics.
The data for these measures is usually a few months old, and they may be subject to seasonal fluctuations. For example, unemployment rates will be higher in January and February because of the weather in many parts of the country, and they will rise every June as students enter the workforce in search of summer jobs.
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