The unemployment rate is a key indicator of the health of the labor market. It measures the number of people without jobs who are available for work and have actively looked for employment in the past four weeks, based on monthly surveys from the Bureau of Labor Statistics (BLS). However, not all people without jobs are unemployed. For example, workers who have finished temporary contracts or have lost their jobs and are waiting to be called back to those positions are not counted as unemployed in the government statistics, but they may still feel depressed about their prospects and hesitant to seek new opportunities. Other categories of the labor force, such as discouraged workers and marginally attached workers, also are not included in the official unemployment rate.
In addition to its direct impact on individuals, high unemployment reduces the overall economy’s potential for growth by reducing consumer spending, which is the main driver of economic activity. It also places a burden on government resources by increasing reliance on social welfare programs and by decreasing tax revenue. In the long run, higher unemployment can have a devastating effect on society by destroying families’ finances, eroding self-esteem, and contributing to feelings of hopelessness that linger even after the economy has recovered from a downturn.
Policymakers need to understand the factors that drive unemployment in order to effectively steer the economy and combat its cyclical fluctuations. That is why LISEP has created the True Rate of Unemployment, which combines data from the BLS with information from other sources such as the Job Openings and Labor Turnover Survey (JOLTS) to provide analysts and policymakers with an accurate picture of America’s employment situation.
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