Unemployment rate is a statistic that describes the percentage of working-age people who are jobless and actively seeking employment. It can be a leading indicator of how strong or weak an economy is. It can also be affected by demographic shifts, such as an aging population. Unemployment statistics are generally based on household labor force surveys, but may also be compiled from administrative records such as unemployment insurance claims and social security data.
Most economists agree that some level of unemployment is necessary for an economy to function properly, as it prevents inflation and allows workers to move between jobs, go back to school, or otherwise improve their skills. However, high and persistent unemployment can have devastating effects on individuals, their families, and their communities. It can reduce consumer spending, causing economic stagnation and making it harder for businesses to hire. In addition, high unemployment can cause governments to spend more on social welfare programs and less on taxes, putting pressure on budgets.
A higher unemployment rate can be the result of economic, demographic, or policy factors that have shifted the balance of supply and demand for jobs. These include the usual pattern of companies expanding and contracting in a dynamic economy, public policies that affect the willingness or ability of employers to hire, or other forces that have changed the demand for specific types of work (e.g., the technology boom of the 1990s made some jobs obsolete). Disaggregated metrics are periodically released to provide a fuller context for these changes. These include figures on frictional and structural unemployment, along with regional disparities.
About the Author
