The unemployment rate is one of the most frequently cited economic indicators, indicating the percentage of the population that lacks employment. It is calculated by dividing the number of unemployed people by the total labor force, and multiplying by 100. However, the unemployment rate does not include people who want to work but cannot find a job or have become discouraged from looking for jobs.
The official statistics are based on a sample survey. Consequently, there is a high probability that the monthly unemployment estimate derived from the sample will differ from the figure obtained by taking a census of the entire population. The reason for the discrepancy is due to factors such as: age, gender, ethnicity, educational level, language barriers, disability status, homemaking responsibilities, caregiving responsibilities, trauma history, transportation access, and other economic and social vulnerabilities.
High unemployment has a profound effect on the economy, in particular by reducing consumer spending. It also puts a heavy burden on the government through increased reliance on welfare programs and lost tax revenue. It can also demoralize workers who have jobs, causing them to feel that their incomes are not sufficient and leading to a sense of dissatisfaction with their jobs. In addition, it has been linked to a wide range of negative social outcomes, including community instability, a reduction in social cohesion and a decline in local pride. For these reasons, it is important to look beyond the headline U-3 unemployment rate and consider other measures of labor underutilization.
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