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Everything You Wanted to Know About Unemployment

One of the great political issues of virtually every election is employment. More often than not, unemployment is a topic of hotly contested debate. The discussions range from who is to blame for high unemployment and who is responsible for low unemployment to whether the unemployment rates are even valid. To participate in the debate, it helps to understand the basics of unemployment.

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What Is Unemployment?

Before you can consider unemployment, it’s important to know about the labor force. The labor force is the total number of people who are either employed or not employed and looking for a job. Individuals who choose not to work (such as stay-at-home parents or retirees) or can’t work (like the disabled) are not counted as being part of the workforce. To be counted as unemployed, someone must have been looking for a job for at least a month.

For the purposes of compiling employment statistics, the Bureau of Labor Statistics considers someone to be employed if they did any work for pay or profit during the period they are surveying. This includes full-time and part-time work. It is not a measure of the quality or desirability of the job, only that it exists. People are counted as employed even if they aren’t working temporarily due to a vacation, illness, maternity or paternity leave, family obligations or labor disputes.

Related Article: Can You Buy a Home if You Are Unemployed?

How Are Unemployed People Identified?

Everything You Wanted to Know About Unemployment

Contrary to what is commonly believed, unemployment numbers are not gathered by totaling up all the people who are receiving unemployment benefits. Among the reasons they are not used is the fact that not everyone who is unemployed applies for or is eligible for unemployment benefits. Some who have collected benefits may have exhausted them and are still looking for work. Instead, the BLS surveys about 60,000 households every month.

In order to ensure that the surveyed group accurately reflects the public at large the Bureau of Labor Statistics replaces 25% of households with new households every month. The result is that a fresh sampling is created every quarter. Households are surveyed either in person or by phone. Interview subjects are all asked the same questions in the same order month after month as a means of making sure that the questioners’ biases do not influence responses.

Seasonal Differences

Everything You Wanted to Know About Unemployment

There are seasonal variations in employment such as weather-related slowdowns in winter in occupations like farming and construction as well as spikes in June that result from high school and college graduates entering the workforce that must be taken into account. In order to prevent these seasonal fluctuations from skewing the unemployment rate statisticians, the BLS uses historical records to make adjustments to the unemployment rate that take into account the natural shifts in unemployment. The statistical procedure is used so that only changes that exceed historic patterns are reflected in the final unemployment percentage.

Related Article: Top 5 Tips for Understanding Jobs Reports

Local Results

The BLS through the Local Unemployment Statistics Program (LAUS) produces employment statistics for about 7,300 locales nationwide. The list includes all 50 states, as well as every county and city with a population of 25,000 or more. The local results use three different estimating procedures to determine local and regional results. The alternative techniques are used because the national survey of 60,000 households is not considered sufficient to generate the far more granular local statistics.

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Frank Addessi Born and raised in the center of the known universe, Brooklyn NY, and currently hiding out in the bucolic hills of northeast Pennsylvania writing about personal finance. His expertise includes personal loans, credit cards and retirement. It's not easy living the American Dream but someone has to do it!
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