When workers are unemployed, they, their families, and the country as a whole lose. Workers and their families lose wages, and the country loses the goods or services that could have been produced. In addition, the purchasing power of these workers is lost, which can lead to unemployment for yet other workers.
Addressing the issue of unemployment requires information about the extent and nature of the problem. How many people are unemployed? How did they become unemployed? How long have they been unemployed? Are their numbers growing or declining? Are they men or women? Are they young or old? Are they White, or Black, or Asian, or of Hispanic ethnicity? How much education do they have? Are they concentrated in one area of the country more than another? These statistics—together with other economic data—can be used by policymakers to determine whether measures should be taken to influence the future course of the economy or to aid those affected by joblessness.
Because unemployment insurance records relate only to people who have applied for such benefits, and since it is impractical to count every unemployed person each month, the government conducts a monthly survey called the Current Population Survey (CPS) to measure the extent of unemployment in the country. The CPS has been conducted in the United States every month since 1940, when it began as a Work Projects Administration program. In 1942, the U.S. Census Bureau took over responsibility for the CPS. The survey has been expanded and modified several times since then.
The basic concepts involved in identifying the employed and unemployed are quite simple:
People are considered employed if they did any work at all for pay or profit during the survey reference week. This includes all part-time and temporary work, as well as regular full-time, year-round employment. Individuals also are counted as employed if they have a job at which they did not work during the survey week, whether they were paid or not, because they were:
These people are counted among the employed and tabulated separately as with a job but not at work, because they have a specific job to which they will return.
People are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Actively looking for work may consist of any of the following activities:
Passive methods of job search do not have the potential to connect job seekers with potential employers and therefore do not qualify as active job search methods. Examples of passive methods include attending a job training program or course, or merely reading about job openings that are posted in newspapers or on the Internet.
Workers expecting to be recalled from temporary layoff are counted as unemployed whether or not they have engaged in a specific job seeking activity. In all other cases, the individual must have been engaged in at least one active job search activity in the 4 weeks preceding the interview and be available for work (except for temporary illness).
The labor force is made up of the employed and the unemployed. The remainder—those who have no job and are not looking for one—are counted as not in the labor force. Many who are not in the labor force are going to school or are retired. Family responsibilities keep others out of the labor force. Since the mid-1990s, typically fewer than 1 in 10 people not in the labor force reported that they want a job.
When the population is classified according to who is employed, unemployed, and not in the labor force on the basis of their activities during a given calendar week, situations are often encountered where individuals have engaged in more than one activity. Since individuals are counted only once, a system of priorities is used to determine their status. Labor force activities take precedence over non-labor force activities, and working or having a job takes precedence over looking for work.
The seasonal fluctuations in the number of employed and unemployed people reflect not only the normal seasonal weather patterns that tend to be repeated year after year, but also the hiring (and layoff) patterns that accompany regular events such as the winter holiday season and the summer vacation season. These variations make it difficult to tell whether month-to-month changes in employment and unemployment are due to normal seasonal patterns or to changing economic conditions. To deal with such problems, a statistical technique called seasonal adjustment is used. This technique uses the past history of the series to identify the seasonal movements and to calculate the size and direction of these movements. A statistical procedure is then applied to the estimates to remove the effects of regular seasonal fluctuations on the data. Seasonal adjustment eliminates the influence of these fluctuations and makes it easier for users to observe fundamental changes in the level of the series, particularly changes associated with general economic expansions and contractions.
Unemployment insurance (UI) programs are administered at the state level and provide assistance to jobless people who are looking for work. Statistics on the insured unemployed in the United States are collected as a by-product of state UI programs. Workers who lose their jobs may file applications to determine if they are eligible for UI assistance. These applications are referred to as "initial claims." Claimants who meet the eligibility requirements must file "continuing claims" for each week that they seek benefits.
Data on initial and continuing UI claims are maintained by the Employment and Training Administration, an agency of the U.S. Department of Labor, and are available on the Internet at http://workforcesecurity.doleta.gov/unemploy/claims.asp.
While the UI claims data provide useful information, they are not used to measure total unemployment because they exclude several important groups. To begin with, not all workers are covered by UI programs. For example, self-employed workers, unpaid family workers, workers in certain not-for-profit organizations, and several other small (primarily seasonal) worker categories are not covered.
In addition, the insured unemployed exclude the following:
Because of these and other limitations, statistics on insured unemployment cannot be used as a measure of total unemployment in the United States. Indeed, over the past decade, only about one-third of the total unemployed, on average, received regular UI benefits.
UI claims data are widely used as an indicator of labor market conditions. Data users must be cautious, however, about trying to compare or reconcile the UI claims data with the official unemployment figures gathered through the CPS. Even if one sets aside the major definitional limitations outlined above, there are comparability issues related to the distinct reference periods, methodologies, and reporting practices of the two data sources. More importantly, though, the weekly UI claims data reflect only people who became unemployed and do not take into account the number of unemployed people who found jobs or stopped looking for work. The official unemployment figures from the CPS, on the other hand, represent the net result of overall movement into and out of unemployment in a given month. Changes in CPS estimates of total unemployment for any given month will tend to be far smaller than the sum total of weekly UI initial claimants over a month-long span.
See the Local Area Unemployment Statistics Frequently Asked Questions page.
Because of the difficulty of developing an objective set of criteria which could be readily used in a monthly household survey, no official government statistics are available on the total number of persons who might be viewed as underemployed. Even if many or most could be identified, it would still be difficult to quantify the loss to the economy of such underemployment.
The concepts and definitions underlying the labor force data have been modified, but not substantially altered, even though they have been under almost continuous review by interagency governmental groups, congressional committees, and private groups since the inception of the Current Population Survey.
The sample survey system of counting the unemployed in the United States is also used by many foreign countries, including Canada, Mexico, Australia, Japan, and all of the countries in the European Economic Community. More recently, a number of East European nations have instituted labor force surveys as well. However, some countries collect their official statistics on the unemployed from employment office registrations or unemployment insurance records. Many nations, including the United States, use both labor force survey data and administrative statistics to analyze unemployment.
The ACS is a household survey developed by the Census Bureau to replace the long form of the decennial census program. For more information, see http://www.bls.gov/lau/acsqa.htm.
Last Modified Date: October 8, 2015