Is the unemployment rate based on the number of people who are currently collecting unemployment payments? If not, what other factors are included?
In: Economics
Different governments have somewhat different methods of calculating their unemployment rate. The US, for example, has the US Bureau of Labor Statistics, and one of the things they do is send out a monthly survey to a range of households (currently about 60k households) and collect employment data from them. That’s considered a big enough sample size to get useful data about the overall unemployment rate.
https://www.bls.gov/cps/cps_htgm.htm
It depends on how “unemployed” is defined by the agency creating the statistic, so it’s a good smart data habit to ask this question when you see the it presented.
In the US “unemployed” is defined as follows and is contrasted against “not in the labor force”.
1) the person is not employed during the week being measured.
2) They were ‘available to work’ during the week being measured
3) They made at least one ‘specific attempt’ to find a job during the month *preceding* the week being measured.
so the unemployment rate is all the people above divided by number of people with jobs.
For example; babies, retired people, or people just sitting around all day doing nothing are *not* considering unemployed, they are ‘not in the labor force’. Also, people who aren’t working but aren’t looking for work because they reasonably expect to be rehired quickly are *not* considered unemployed either.
It depends on which rate you are talking about – there are multiple unemployment rates that the government calculates.
The one we typically discuss – U3 – is defined by the Bureau of Labor Statistics as people who do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. So, for example:
– Someone who was laid off and is looking for work would be unemployed.
– A stay-at-home parent would not be unemployed.
– Someone who was laid off and is driving for Uber would not be unemployed.
– Someone who is discouraged and hasn’t sent out a resume in 2 months would not be unemployed.
For that reason, many economists don’t like U3 as it can undercount the true unemployment and under-employment rates. U6 extends the job search window to 12 months and factors in people who are under employed as well.
Unemployment calculations are continuously changed to reflect the narrative that is being told. It’s typically WAY higher than the reported number. This is for the US but likely everywhere else as well.
Unemployment rate is based on number of people wanting to/actively seeking work who are not doing so. So a person who’s been unemployed long enough to run out their unemployment payments but is still looking for job still counts. A new college grad looking for first job counts. The mother looking to re-join the workforce after taking time off to raise kids counts. The former freelancer or gig worker now looking for a regular job counts. None of those people would be collecting unemployment checks.
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