The unemployment rate is not just a simple matter for calculation, though some people assume it is. It is not just dividing the number of jobless people by the number of people employed to derive a percentage. Nor can you calculate the unemployment rate simply by evaluating the number of people who file for unemployment benefits, or who currently receive benefits. These benefits usually are of short duration and do not cover all people who are actively looking for work.
Furthermore, there are plenty of people who are not employed and don’t choose to be, people who can’t be employed due to disabilities, and people in prison who aren’t employable. Then there are the many part time workers who would like full-time jobs, independent contractors whose state of employment can fluctuate, and a variety of other people in different circumstances who don’t meet the standards of being either “employed” or “unemployed,” and who don’t get counted. Thus rate calculation is based on sample populations, and several different formulas. It’s hard to get a true unemployment rate, and percentages may not always accurately represent the current economic climate in a country.
For the purpose of figuring unemployment rates, the unemployed are generally considered those people who are not working but are actively seeking work and have the desire and availability to work full time. The International Labour Organization (ILO) figures the rate from gathering information from surveys, evaluating people receiving or applying for unemployment benefits, making educated guesses from surveys, and evaluating the monthly tallies gleaned from employment offices.
The United States uses several methods for computing unemployment rates. They use statistics gathered by the US Bureau of Labor Statistics, and by the US Census Bureau. Additionally, they utilize the Current Population Survey (CPS), which analyzes about 60,000 people on a monthly basis to check employment and unemployment rate. These figures are combined to generate a report of the current unemployment rate, and workers in the CPS are broken into five groups:
- Unemployed for more than 15 weeks
- People who lost jobs or finished temporary jobs
- The group meeting ILO figures
- People who have stopped looking for work
- Those expressing a desire to work but who have stopped looking temporarily
- Part-time workers who can’t find full-time jobs.
The unemployment rate then combines these figures into a percentage, which changes for reporting agencies, like the Bureau of Labor Statistics, on a monthly basis. Economists may also make predictions about how a business or economic climate may affect employment or lack thereof, and these predictions are fairly accurate. Yet none of these surveys, studies, or figures can be said to be totally accurate in evaluating unemployment rate, and this is problematic. When countries must address the needs of their citizens, understanding the impact of either voluntary or involuntary unemployment is extremely valuable in formulating economic plans. Generally, the more information that can be gathered about the rates of employment and unemployment, the better any economic plans or strategies can be.