A lot of people noticed when the unemployment rate fell to 8.8 percent in March, but not everyone knows how that rate is determined. For instance, many people think that you have to receive Unemployment Insurance benefits in order to be counted as unemployed, which is not the case. So, to clear up any confusion it’s useful to review how the Bureau of Labor Statistics determines the unemployment rate.
Every month, the government contacts 60,000 scientifically-selected households and asks a range of questions about the employment status during the previous week of everyone in the household age 16 and older. We call this (using all the creativity imparted by our economics degrees) the “Household Survey.” BLS uses the answers to this survey to determine the labor market status of the each member of the household, and by extension, of the whole country. The “labor force” consists of all workers who did have jobs — the “employed” — plus all those who did not have jobs, but were actively looking for work and available to take it if offered — the “unemployed.” The headline unemployment rate is the number of unemployed workers divided by size of the labor force.
The headline unemployment rate is the traditional measure of unemployment in the U.S., and is directly comparable to measurements collected in other developed countries. However, BLS publishes several other alternative measures of labor under-utilization to help understand the full employment situation (see table A-15 in the monthly news release for more). You can find more details on how BLS defines and measures unemployment on its website.
Editor’s Note: The author, Andrew Langan, is a policy adviser in the Office of the Chief Economist at the U.S. Department of Labor.