Unemployment occurs when people who want to work but are unable to find jobs. It is considered a key indicator of economic health because it reflects the number of individuals who are essentially “cut off” from the labor market, deprived of wages and income. The most widely used unemployment measure is the national unemployment rate, which represents the percentage of the population age 16 and over who is unemployed. The statistics that are used to calculate the rate come from a variety of sources, including surveys, census counts and the number of individuals who apply for unemployment insurance benefits. Unemployment rates are often broken down by demographic group such as race and ethnicity, education level, and gender. Economic factors can lead to unemployment, including cyclical and structural unemployment.
What Is the Difference Between Cyclical and Frictional Unemployment?
The underlying causes of unemployment are complex. Economic factors can influence the rate, such as changes in aggregate demand, which affects the amount of goods and services that are produced; a decrease in aggregate demand may lead to layoffs and increased unemployment. Other economic factors that can contribute to unemployment include geographic changes, shifts in industry demand, labor market rigidities (e.g., strong unions), and monetary policy, which influences the economy through changes in the money supply and interest rates.
Surveys collect data on the number of individuals who are jobless, as well as information about their past employment and current search for a job. The questions ask about the last job held, the type of work performed, and the reason for joblessness. Individuals incarcerated, children under the age of 16, and individuals who have retired are excluded from the labor force and are not counted in unemployment statistics.