The unemployment rate is a key indicator of the health of a country’s job market and economy. It is based on a monthly survey by the Bureau of Labor Statistics that measures people who are either unemployed or actively looking for work. It does not count workers who have dropped out of the labor force due to factors like illness or childcare responsibilities. The current unemployment rate is 4.2%. The BLS has a range of unemployment measures called U-1 through U-6, with the most strict measure counting only those who are officially considered unemployed. LISEP’s True Rate of Unemployment (TRU) includes both those who are technically unemployed and those who are “marginally attached to the labor force,” meaning that they want a full-time job or would be available for one, but did not look for a job in the past four weeks.
Economic fluctuations are a major factor in the rise and fall of unemployment rates. When the economy is growing, companies hire more workers to meet consumer demand for goods and services. When the economy slows, companies cut back on hiring and may even lay off employees. When more workers are out of work, they can’t spend their wages, which decreases consumer demand and exacerbates the economic downturn.
High unemployment also hurts communities, increasing social unrest and eroding confidence in the future. It can increase the need for government assistance programs and eat into tax revenue, which could further strain local economies.