What Is the Unemployment Rate?

What Is the Unemployment Rate?

The U.S. unemployment rate is released on the first Friday of every month for the preceding month. The current and past editions of the report are available from the Bureau of Labor Statistics (BLS). The unemployment rate is the percentage of the labor force without a job. It is a lagging indicator and generally rises or falls with changing economic conditions.

Measuring Unemployment

In the U.S., the most commonly cited national unemployment rate is the U-3, which the BLS releases as part of its monthly employment situation report. It defines unemployed people as those willing and available to work and who have actively sought work within the past four weeks.

According to the BLS, those with temporary, part-time, or full-time jobs are considered employed, as are those who perform at least 15 hours of unpaid work for a family business or farm. Many people who want to work but cannot or become discouraged after looking for work without success are not considered unemployed, but categorized outside the labor force.

The unemployment rate is seasonally adjusted to account for predictable variations, such as extra hiring during the holidays. The BLS also provides the unadjusted rate.

Unemployment by State

Other Metrics

The BLS publishes five alternative measures: U-1, U-2, U-4, U-5, and U-6. U-6 is often called the real unemployment rate, but U-3 is the only official unemployment rate. The others are measures of labor underutilization. 

U-1: The U-1 unemployment rate includes those unemployed for 15 weeks or more as a percent of the civilian labor force. The U-1 unemployment rate as of April 2024, was 1.3%.

$\begin{aligned}U-1=\bigg(\frac{\text{Unemployed for 15 weeks+}}{\text{Labor Force}}\bigg)\times 100\end{aligned}$U−1=(Labor ForceUnemployed for 15 weeks+​)×100​

U-2: Those who lost jobs and completed temporary jobs as a percent of the civilian labor force account for the U-2 unemployment rate. This rate for April 2024 was 1.9%.

$\begin{aligned}U-2=\bigg[\frac{\text{Lost Jobs}+\text{Completed Temp Jobs}}{\text{Labor Force}}\bigg]\times 100\end{aligned}$U−2=[Labor ForceLost Jobs+Completed Temp Jobs​]×100​

U-4: Unemployed people, plus discouraged workers, as a percent of the labor force make up the U-4 unemployment rate, which was 4.1% as of April 2024. This category includes people who lack the necessary qualifications or education and believe work is unavailable in their field.

$\begin{aligned} U-4=\frac{\text{Unemployed}+\text{Discouraged Workers}}{\text{Labor Force}+\text{Discouraged Workers}}\times 100\end{aligned}$U−4=Labor Force+Discouraged WorkersUnemployed+Discouraged Workers​×100​

U-5: Unemployed people, discouraged workers, plus those marginally attached to the labor force, as a percent of the labor force make up the U-5 rate. The U-5 rate for April 2024, was 4.8%. The marginally attached include discouraged workers and anyone who would like a job and has looked for one in the past 12 months but actively gave up searching. As with U-5, the denominator is expanded to include the marginally attached, who are not technically part of the labor force.

$\begin{aligned}U-5=\frac{\text{Unemployed}+\text{Marginally Attached}}{\text{Labor Force}+\text{Marginally Attached}}\times100\end{aligned}$U−5=Labor Force+Marginally AttachedUnemployed+Marginally Attached​×100​

U-6: This metric is the BLS's most comprehensive and includes unemployed people, people who are marginally attached to the labor force, plus those who are employed part-time for economic reasons, as a percentage of the labor force. The denominator for this ratio is the same as in U-5. The rate for April 2024, was 7.4%.

$\begin{aligned} &U-6=\frac{\text{Unemployed}+\text{MA}+\text{PTER}}{\text{Labor Force}+\text{MA}}\times 100\\&\textbf{where:}\\&\text{MA}=\text{Marginally attached}\\&\text{PTER}=\text{Part-time for economic reasons}\end{aligned}$​U−6=Labor Force+MAUnemployed+MA+PTER​×100where:MA=Marginally attachedPTER=Part-time for economic reasons​

Collecting Data

Employment statistics are produced by the BLS, an agency within the Department of Labor (DOL). Every month the Census Bureau, part of the Department of Commerce (DOC), conducts the Current Population Survey (CPS) using a sample of approximately 60,000 households, or about 110,000 individuals.

The survey includes information on race, ethnicity, age, veteran status, and gender. The sample is rotated so that 75% of the households remain constant from month to month and 50% from year to year. The surveys include industry information, occupations, average earnings, and union membership. For those who are jobless, interviewers also ask whether they quit or were fired or laid off.

The survey excludes individuals under the age of 16 and those who are in the Armed Forces. People in correctional facilities, mental health care facilities, and similar institutions are also excluded.Interviewers ask questions that determine employment status but do not ask whether respondents are employed or unemployed. Nor do the interviewers assign employment status; they record the answers for the BLS to analyze.

Unemployment and the Economy

Unemployment is one of the most closely-watched indicators for economic health, along with gross domestic product (GDP) and the consumer price index (CPI). The unemployment rate has an inverse relationship with the stock market and inflation, two key metrics for the overall economy.

A low unemployment rate tends to be associated with an increased average wage, due to the reduced labor supply. This can result in inflation, as employers raise prices to account for increased labor costs. Low unemployment also tends to be accompanied by increased stock prices, because the workforce has more disposable income.

The Bottom Line

In assessing an economy's health, the nation's unemployment rate plays a major factor in setting monetary policy and making strategic economic decisions. There are various ways to calculate unemployment, however, the general public is most familiar with the U-3 rate. The calculation for this iteration of the unemployment rate is to divide the number of unemployed individuals by the total workforce.