The unemployment rate is an important economic indicator that is closely watched by government and private institutions. It provides a snapshot of the labor market and is a key factor in setting monetary policy and making strategic economic decisions.
The main source of information about the unemployment rate is a monthly survey of households conducted by the Census on behalf of the Bureau of Labor Statistics. This is done with a random sample of households and includes people who are employed, those without jobs but looking for work (actively seeking employment), and those not in the workforce but who want to be. The sample changes each month so that no household is repeated in the same month.
To be considered unemployed, a person must be out of work and actively seeking employment by, for example, contacting prospective employers, visiting job agencies, or sending out resumes. Some people who would like to work but cannot find full-time jobs are not counted as unemployed because they have been unsuccessful in finding employment for so long that they became discouraged and stopped searching. This hidden unemployment is one reason that official unemployment figures are often lower than they should be.
There are a variety of factors that cause the unemployment rate to fluctuate, both in the short term and in the long run. These include the usual pattern of companies expanding and contracting their workforces in a dynamic economy, social and economic forces that affect the eagerness or indifference of workers to work, and public policies that influence either the willingness or ability of businesses to hire.
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