What is the Current Unemployment Rate?

Current Unemployment RateJul 08, 2014: Unemployment has been a rising concern since the US economy went into recession. At present, our president is trying to boost employment by providing tax cuts and tax credits to encourage businesses to hire.

In most reports concerning the US economy, the unemployment rate is frequently mentioned. But many are at a loss for understanding what this number really means. Let's take a look at the unemployment numbers and try to unravel its real meaning.

What is the meaning of Unemployment Rate?

The unemployment rate is defined as the number of unemployed persons divided by the labor force, where the labor force is the number of unemployed persons plus the number of employed persons. The unemployment rate represents the number unemployed as a percent of the labor force.

Where can we find the Current Unemployment Rate?

The most reliable information on the Current Unemployment Rate can be found from the Current Population Survey - the Labor Force Statistics published by the Burea of Labor Statistics - United States Department of Labor (http://www.bls.gov/CPS/). As of Aug 2011, the seasonally adjusted unemployment rate is at 9.1%. Comparatively, the annual average unemployment rate for 2010 was 9.6%. There has been marginal improvement in 2011!

Who is an employed person?

Unemployed Person?Persons 16 years and over in the civilian non-institutional population who, during the reference week:
  1. did any work at all (at least 1 hour) as paid employees, worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family, and
  2. all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs.
Each employed person is counted only once, even if he or she holds more than one job. Excluded are persons whose only activity consisted of work around their own house (painting, repairing, or own home housework) or volunteer work for religious, charitable, and other organizations.

It is to be noted that the above definition implies that a person who loses a 40 hour per week job, but works for one hour mowing a lawn for pay is classified as employed! Also, a person who simply expresses interest in having a job is classified as unemployed. "Discouraged workers" who have lost a job, but do not make an effort to find a new job in a given week are not classified as unemployed or even as in the labor force.

Are there any visualizations about the meanings of being unemployed?

We found a couple of useful visualizations about the meaning of being counted as "unemployed." Mint.com (a leading online personal financial management product) has released an animated video visualization of “Are You Really Unemployed?” to explain who exactly is represented by the unemployment figures, and how the government chooses to use this number, even though the actual percentage of unemployed Americans is significantly higher.

WallStats.com has created "The Not So Governmental Guide to the Unemployment Rate." It demonstrates the meaning of an unemployed person as deemed by the US government by using a flow chart. Click on the image to enlarge it for your perusal.

Thus we see that the announced unemployment rate is not a very precise tool for gauging the strength of the US economy.

What are your opinions about the definition of unemployment rate and how it can be used as a yard stick to measure the health of a country's economy? We are looking forward towards your views and opinions.

Image Source(s): iStockPhoto

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