Unemployment Rate

Unemployment rate is the percentage of labor force that is currently unemployed but was available for job in last four weeks and was actively seeking employment in that period. It is the ratio of the number of unemployed people to the sum of the number of employed and unemployed people.

It is arguably the single most important economic statistic. The closer the rate is to the natural rate of unemployment, the healthier the economy is. An unemployment rate significantly higher than the natural rate of unemployment means that the economy is in recession.

According to the definition of the Bureau of Labor Statistics (BLS), employed persons are persons who are:

• Aged 16 or older,
• Work for an employer or are self-employed,
• Not volunteers, and
• Not engaged in self-service such as homemaking, etc.

Unemployed persons are persons who:

• Are aged 16 year or older,
• Are not engaged in any employment (self or otherwise),
• Were available for job in last four weeks, and
• Have made specific efforts to find a job at any time during last four weeks.

The BLS provides a labor data database here.

Formula

Examples

Example 1

In December 2012, 143,060 thousand of US residents were employed and 11,844 thousand were unemployed. Find the unemployment rate for December 2012.

Uemployment rate
= 11,844 ÷ (143,060 + 11,844)
= 7.64%

Example 2

Following data are from the labor department of Bretzelburg. Calculate the country's unemployment rate.

Number of employed people is 1,481,232. We have to indirectly find the number of unemployed people as follows:

Unemployment rate
= 111,660 ÷ (111,669 + 1,481,232)
= 7.01%

by Obaidullah Jan, ACA, CFA and last modified on Mar 30, 2019