The happenings "inside" the Wisconsin State Treasury and across the street at the State Capitol

The Economy and You #3 – The Unemployment Rate

Does the unemployment rate provide an accurate measurement of the health of the state’s economy? 

While economists use a lot of data and statistics to determine the health of our economy, most families look at one statistic – the unemployment rate.  The unemployment rate measures the percentage of people wanting to work but unable to find a job.  Since labor is our economy’s main resource, making sure people have jobs is of great importance to economic policy makers and state and national leaders.

But how does the government calculate the unemployment rate?  Each month the Bureau of Labor Statistics (BLS) uses two surveys to determine employment and unemployment figures.  The monthly Household Survey comes from approximately 62,500 households which provide information on employment broken down by age, sex, race, and other characteristics.  The BLS also surveys around 150,000 businesses to provide data on hours and earnings for various industries. The Current Employment Statistics program provides data from an employer perspective while the Household Survey provides information from the employee perspective.  The BLS collects data from the sources to provide monthly employment data.

The first number needed to calculate the unemployment rate is the size of the labor force. The labor forced is defined as the number of employed adults plus the number of unemployed adults.  The Household Survey places all adults into three categories: 1) Employed: those working as a paid employee, self employed, or unpaid working for a family business; 2) Unemployed: those not employed who are available for work and have been looking for work during the previous four weeks; and 3) Not in the Labor Force: adults who do not fit into the first two categories such as full-time students, homemakers, retirees, and discouraged workers.  Discouraged workers are those who want a job but have given up looking.

So the unemployment rate is considered the number of unemployed divided by the total labor force and multiplied by 100.  For example, according to Department of Workforce Development, in April of 2011, the total workforce in the state ofWisconsinwas 3,044,836 persons and 225,840 of those were unemployed. Therefore the state unemployment rate is 7.4%

But does this provide an accurate measurement of the health of the state’s economy?  Many argue that it does not.  Critics argue that unemployment rates do not address important issues like duration of unemployment, variations in unemployment among demographic groups, variations in unemployment among local regions and industries, and what should be considered as an unemployed person.  These and other issues complicate the interpretation of unemployment data and, in turn, the health of our economy.


One response

  1. Pingback: The Economy and You – Who are the Unemployed? « wistatetreasury

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