One of the most watched indicators of economic health, the unemployment rate is a key factor in setting monetary policy and making strategic economic decisions. While there are different ways to measure labor underutilization, the government’s most commonly used measurement is the official U-3 rate, which includes people who have been out of work for 15 weeks or more and have actively searched for a job in the past four weeks. There are five other categories of unemployment, as well, though those are less frequently used. The BLS produces these figures each month through a survey of approximately 60,000 households, known as the Current Population Survey (CPS).
While the official definition of unemployment includes people who have been out of work for long periods of time, this doesn’t necessarily imply that they want to stay unemployed. For example, older workers who have lost their jobs may decide that they would prefer to retire rather than look for new work. Other reasons for long-term unemployment include frictional unemployment that results from people switching between jobs in a dynamic economy, as well as public policies that can either affect the willingness of workers to accept employment or the desire of businesses to hire employees.
The unemployment rate is not a precise indicator of the state of the economy, but it can help to put broader trends in perspective. For example, the rate reached a high point in the early 1980s, fell to about 5 percent during the Reagan presidency and rose to above 10 percent during the Great Recession.
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