The unemployment rate is one of the most important economic indicators for a country. It is used to assess an economy’s health, set monetary policy and make strategic economic decisions. There are many ways to measure unemployment, but the Bureau of Labor Statistics uses a monthly survey to identify people who are either employed or actively seeking work. This is known as the civilian labor force, and it excludes students and homemakers. The rate also does not include people who are no longer looking for employment, often because they have been unsuccessful in their search and have become discouraged.
This means that the official unemployment rates may underestimate the true level of joblessness in a country. Other measures that are available to help assess the true level of unemployment include underemployment and long-term unemployment. Long-term unemployment is defined as someone who has been unemployed for 27 weeks or more and is searching for a job. This type of unemployment usually results from weak demand for goods and services, rather than a mismatch between skills or the number of jobs that are being offered.
A new indicator, developed by the Ludwig Institute for Shared Economic Prosperity, measures the “true rate of unemployment” (TRU), which includes all workers who can’t afford basic necessities and are functionally unemployed. The TRU is higher for women, Hispanic and Black workers than it is for White workers. It is also higher for people living in poverty.
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