The unemployment rate is a key indicator of an economy’s health, as it shows how many people are not working and looking for jobs. It is used by economists and policy makers to help set monetary policy and make strategic economic decisions. It is measured by the Bureau of Labor Statistics (BLS) and based on data from the Current Population Survey. There are several measures of unemployment, ranging from U-1 to the broadest measure, U-6, and they vary in how strict they are on who is counted as unemployed.
There are a number of reasons why the unemployment rate rises and falls. One of the most common is that a recession or economic slowdown causes people to lose their jobs. This often leads to them giving up and leaving the workforce altogether, meaning they are no longer considered officially unemployed. In addition, technological advances can increase labor productivity and decrease the need for workers, thereby reducing the natural rate of unemployment.
Unemployment has a range of negative impacts on society, from family finances to the social fabric of communities. The most immediate impact is on the economy, as high unemployment rates reduce consumer spending, a major driver of economic growth. This in turn can lead to a downward spiral as companies lay off workers and consumers spend less, leading to further layoffs and more economic stagnation. It also increases the burden on government resources in the form of increased reliance on welfare programs and lost tax revenue.