A country’s unemployment rate is the percentage of people who are out of work and actively seeking employment. It is usually determined at the national level by conducting labour-force surveys and comparing them to the population. This statistic is important to monitor because it reflects the economic health of an economy. Unemployment tends to move with the business cycle, increasing during a recession and decreasing when businesses are hiring again. It is also important to note that different countries have their own ways of measuring unemployment. For example, China uses a different methodology than the United States and Europe.
In the United States, the Bureau of Labor Statistics reports monthly on unemployment. The headline unemployment rate (U-3) measures the number of people out of work and looking for a job, but it excludes people who have dropped out of the labor force or are unable to find full-time employment for reasons such as caregiving, education, or retirement. It is also commonly understood that the unemployment rate understates the true state of an economy because it fails to take into account discouraged workers who have given up on their search for jobs or are only working part-time due to financial constraints.
A newer measure of unemployment, introduced in 2020 by LISEP, tracks “functionally unemployed” individuals. These are individuals whose wages don’t cover basic needs. For example, they may be able to find jobs but are working in low-wage industries such as health care or retail or they may be relying on social services and living hand-to-mouth.