An economy’s unemployment rate is one of its most important economic indicators. It’s a key factor when evaluating monetary policy, and it influences the economic decision-making of many companies. But it’s also important to remember that the numbers you see and hear about in the news are only a part of the story. The problem is that different countries use a wide variety of definitions when it comes to determining who counts as part of the labor force, and those definitions can have a significant impact on the unemployment figures that are reported.
In the United States, for example, the Bureau of Labor Statistics uses a survey that randomly samples about 60,000 households to find out which people are working or looking for work. This method of identifying the civilian labor force excludes those who are not considered part of it, such as children, retirees, and college students, as well as discouraged workers who have given up on their job search or are on temporary layoff.
The resulting data is then used to calculate the official unemployment rate, which is the number of unemployed individuals divided by the total labor force. A few other important metrics are also used to evaluate the health of an economy, such as the employment-population ratio and the labor-force participation rate.
EPI’s new comprehensive jobless rate (see the chart below) offers a way to measure all of these different elements and more, and it is designed to provide a complete picture of the state of the labor market. The results will offer a check against those who make alarmist claims about the state of the economy, and they will also help guide policymakers as they consider economic decisions.
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