The unemployment rate is a key indicator of economic health and job market conditions. It can change based on business cycles or the number of people who are leaving or joining the labor force. It can also vary by demographics or region. In general, unemployment rates tend to increase during or shortly after economic downturns or recessions as demand for goods and services decreases, causing businesses to cut costs by laying off workers or freezing hiring. In economic recoveries or expansions, increased demand for goods and services often leads to more jobs being created, which lowers the unemployment rate.
There are several ways to measure unemployment, and the Bureau of Labor Statistics (BLS) uses two surveys to produce monthly estimates. The first survey, the Establishment Report, asks a random sample of employers how many people they are employing. The other, the Current Population Survey (CPS), conducts interviews with households and asks how many of their members are employed, looking for work, or not available to work because they have recently quit a job. BLS has been conducting the CPS since 1940 and uses a rotating sample of 60,000 households each month, which helps strengthen the reliability of the estimates.
High unemployment can be costly for individuals, families and society as a whole. It can lead to financial hardship, reduce productivity, and make it difficult for workers and their families to purchase goods and services, thus lowering the economy’s overall standard of living. In addition, it can lead to social unrest and political instability.