Understanding the unemployment rate
Readers so often misunderstand how the unemployment rate is determined that an explainer sentence or two should be included in most any story about it.
Whether a person is receiving unemployment benefits has nothing to do with calculating the rate.
The U.S. Bureau of Labor Statistics determines the unemployment rate from the results of what is called the Current Population Survey.
People are basically asked:
- Are you working?
- If you are not working, are you seeking work?
The unemployment rate is the percentage of people age 16 and older seeking work among the total labor force (those working or looking for work).
The unemployment rate, however, does not provide a complete picture.
- Part-time workers are counted the same as full-timers, regardless of whether they are working fewer hours than previously.
- Under employed workers (those who accept pay cuts to obtain jobs) are counted no differently than any other worker.
A caution in reporting workforce numbers
Do not confuse the number of workers (reported in determining the unemployment rate) with the number of jobs.
The size of the workforce as reported with the unemployment numbers is an accounting of the number of individuals working or not working.
The job numbers are determined by a like sounding, but different, survey called Current Employment Statistics.
This survey asks employers for information about their payrolls. The result is the number of jobs. A person who has two jobs is counted twice, because two employers will provide the information.
A summary:
- Current Population Survey used for unemployment rates.
- Employment numbers are determined by asking individuals if they are working.
- Each person is counted just once.
- They are counted for the city, county or state where they live.
- Current Employment Statistics used for job numbers.
- Job numbers are determined by asking businesses how many people they employ.
- The same person can be counted by multiple employers.
- Jobs are counted for the city, county or state where the jobs are located.
The Bureau of Labor Statistics provides more detailed about the unemployment and employment (job) surveys.