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17 August, 2021
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17 August, 2021

Unemployment rate

The unemployment rate is an important indicator of the employment and economic situation of a country. Represents the percentage of the labor force that is unemployed but actively seeking employment.

Understanding the Unemployment Rate

An unemployed person is one who does not have a job but is looking for one. The unemployment rate includes both people who are unemployed and those who are looking for a job.

In the United States, the unemployment rate is measured in different ways, through employment surveys, social security statistics, office employment statistics, and many more. When calculating the Unemployment Rate, the Bureau of Labor Statistics takes into account all the information collected through these various methods to create a general picture of the labor market.

In times of economic problems, the unemployment rate may be lower than the number of people who are looking for work since the official unemployment rate only includes people who are actively looking for work. There may be many people who have already given up a job and are not included in the statistics.

How is the Unemployment Rate calculated?

In the United States, the Bureau of Labor Statistics conducts a monthly survey of about 50,000 households, which are known as the Current Population Survey (CPS). The results obtained are used to calculate the unemployment rate. Being a percentage, the unemployment rate is calculated by dividing the number of unemployed workers by the total labor force and multiplying this result by 100.

The Cost of Unemployment

At the individual level, the cost of unemployment for a person has a direct impact on their quality of life. Even in those countries where there are assistance benefits for the unemployed, the income level of these benefits is usually less than 50% of the income that a person received through employment.

One of the most important blows is in consumption, unemployed people consume much less than they usually consume regularly. Other important aspects that are affected are savings.

Unemployment has other individual effects in the long term, for example, a person who has been unemployed for a long time can change his long-term vision regarding his investments and expenses.

At the country level, the costs of unemployment are significant. In those countries where there are unemployment assistance benefits, a higher unemployment rate means a higher payment in benefits to the unemployed, food assistance and other services.

Because people are not working and are not consuming at the same levels as before, tax revenues will also be reduced. Less tax revenue can force countries to borrow or cut spending in other sectors.

In the case of countries like the United States where 70-80% of their economy is based on personal consumption, unemployment is very dangerous. The lack of production due to unemployment and the reduction in consumer spending generates a reduction in GDP.

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