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How is the U.S. Unemployment Rate Calculated?

In general, the unemployment rate in the United States is obtained by dividing the number of unemployed persons by the number of persons in the labor force (employed or unemployed) and multiplying that figure by 100. There are, however, various ways of defining “unemployed,” each yielding a distinct unemployment rate. The standard unemployment rate, referred to as U-3, is the one most often cited. By that measure, a person is counted as unemployed if he or she does not have a full-time, part-time, or temporary job, is actively looking for a job, and is currently available to be hired. The category of unemployed persons also includes those who have been temporarily laid off. A person is understood to be actively looking for a job if he or she has tried to obtain one (e.g., by filling out an employment application, sending a résumé, or having a job interview) within the preceding four weeks. Persons who are only “marginally attached” to the labor market—those who want and are available for a job and have actively looked for a job within the preceding 12 months but not within the preceding four weeks—are considered neither employed nor unemployed and thus not part of the labor force. Also excluded are “discouraged” workers, a subset of the marginally attached who are not looking for a job specifically because they believe there are none for which they are qualified or because they have been victims of employment discrimination.

In contrast, what is often called the “real” unemployment rate, or U-6, takes into account not only those who are unemployed by the U-3 definition but also those who are marginally attached and those who are employed part-time for economic reasons (i.e., those who want a full-time job but can find only a part-time job). Under U-6 the total number of persons in those groups is divided by the number of persons in the labor force, understood to include persons who are employed, marginally attached, or underemployed. For obvious reasons, the real unemployment rate is greater than the standard rate, sometimes significantly so. For example, according to the Bureau of Labor Statistics, in March 2020 the standard rate was 4.4 percent while the real rate was 8.7 percent.

Find out more about the U.S. unemployment rate at: https://www.bls.gov/bls/unemployment.htm

This answer was originally published on Britannica’s Beyond.

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