The unemployment rate measures the number of people who do not have jobs but are actively seeking employment. It is one of the most closely watched economic indicators and is used by economists to gauge the health of the economy. The Bureau of Labor Statistics uses data from a monthly survey called the Current Population Survey to measure unemployment. The survey samples a small group of households and changes the sample each month to strengthen the accuracy of the estimates. The survey has been conducted since 1940.
When there is a high unemployment rate, consumers will spend less money which in turn causes businesses to reduce production and lay off workers. This cycle can lead to a recession. High levels of unemployment can also have a negative effect on those who still have jobs, as they may feel more worried about losing their job or become discouraged from seeking other work.
There are several different ways to measure unemployment. The most commonly reported measure is the U-3 unemployment rate, which includes only those who are unemployed and have been looking for a job in the past four weeks. Other measurements include the U-4, which includes those who are working part time but would prefer full-time work and have been looking for a job in that time frame, and the U-5, which adds those who are marginally attached to the labor force, including those who want a full-time job but have not looked for one in the past four weeks.