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How To Calculate Unemployment Rate

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Not In The Labor Force

How to Calculate the Unemployment Rate

In the Current Population Survey, people are classified as not in the labor force if:

In other words, people not in the labor force are those who do not meet the criteria to be classified as either employed or unemployed, as defined above.

People not in the labor force are asked whether they want a job and if they were available to take a job during the survey reference week. They also are asked about their job search activity in the last 12 months and their reason for not having looked for work in the most recent 4 weeks.

On the basis of this information, people not in the labor force are classified into several subgroups, including people who want a job now, people marginally attached to the labor force, and discouraged workers. These subgroups are defined below.

What Factors Affect The Unemployment Rate

Since the Great Depression, the unemployment rate has continued to improve. The government has learned more about how to reduce unemployment. According to research, job programs are the most cost-effective solution to the problem of unemployment.

Job programs are more effective in reducing unemployment than tax cuts. The economy can also be boosted by extending unemployment benefits. Unemployed people are much likelier to spend the money that they receive on their daily needs so that each dollar goes back into the economy and stimulates growth.

How Does The Us Bureau Of Labor Statistics Collect The Us Unemployment Data

The unemployment rate announced by the U.S. Bureau of Labor Statistics on the first Friday of each month for the previous month is based on the Current Population Survey , which the Bureau has carried out every month since 1940. The Bureau takes great care to make this survey representative of the country as a whole. The country is first divided into 3,137 areas. The U.S. Bureau of the Census then selects 729 of these areas to survey. It divides the 729 areas into districts of about 300 households each, and divides each district into clusters of about four dwelling units. Every month, Census Bureau employees call about 15,000 of the four-household clusters, for a total of 60,000 households. Employees interview households for four consecutive months, then rotate them out of the survey for eight months, and then interview them again for the same four months the following year, before leaving the sample permanently.

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How To Calculate The Employment Rate

It’s important for job seekers to know and understand numbers such as the employment and unemployment rates. These numbers allow you to compare employment and unemployment rates for a period of time. Employment rates can be calculated for cities, counties, states and countries. The employment and unemployment rates only include people above age 16 who are potential workers. People in school, and who are retired or institutionalized are not included in the calculations.

Determine the number of employed people and total labor force by accessing the Bureau of Labor Statistics. Record the number of employed people and total labor force.

Calculate the employment rate. Divide the number of employed people by the total labor force. Multiply this number by 100. The result of these calculations is the employment rate.

Calculate the unemployment rate. You can either subtract the employment rate from 100 to determine the unemployment rate, or you can divide the number of unemployed people by the total labor force and multiply by 100.

Are You Eligible For Unemployment

NB2. How to calculate the unemployment rate

First, make sure you are eligible for unemployment. While it varies based on your state, you generally need two things to qualify. First, you need to have lost your job through no fault of your own. It typically means you are ineligible if you quitalthough there are exceptions, like if you quit because of impossible work conditions. If you are fired for cause, you also are likely ineligible.

You also have to have been employed for a minimum amount of time or have earned a minimum amount in compensation.

Once you find out whether you are eligible, you can file a claim for unemployment benefits. If you’re not sure about your eligibility, check with your state unemployment office. You don’t want to lose out on unemployment compensation because you didn’t think you would qualify.

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What Are The Other Measures Of Us Unemployment

In response to criticisms that the official rate paints an unjustifiably rosy picture of the health of the labor market, the BLS publishes five alternative measures: U-1, U-2, U-4, U-5, and U-6. Though these are often referred to as unemployment rates , U-3 is the official and the most commonly cited national unemployment rate. The others are characterized as measures of “labor underutilization.”

What Is The Unemployment Rate Definition

Occupation and career are one of the essential aspects in our life: typically, we begin to prepare for a vocation from our childhood, and, from that point on, we spend most of our life working until we retire. Most people rely on the financial compensation of their labor activity to keep their standard of living, and many people find personal accomplishment in their occupation. For these reasons, it is apparent that the loss of job and the ensuing state of unemployment can have a particularly adverse impact on a person’s or a family’s life. It can lower the quality of life, weaken self-esteem and, combined with the uncertainty about the future, can make daily life worrisome.

Looking from a broader perspective, unemployment can harm the economy as a whole, as well as the society: the more people who are faced with involuntary time off, the fewer goods and services that are delivered, therefore reducing the income generated in an economy. Consumption expenditure and investment will then lower, which can hamper economic growth.

It is not surprising that unemployment is a leading concern in politics and economics. It is typically measured by the unemployment rate that is the fraction of the labor force that is away from work. Macroeconomists study how this variable changes, what the leading factors are behind this, and how it interacts with other variables.

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Reference Week And Survey Interview Week

The Current Population Survey “reference” week is the specific week of the month used to determine the employment status of survey respondents, and the last week of the 4-week job search period used to determine unemployment status.

The reference week usually is the 7-day calendar week that includes the 12th of the month, with occasional exceptions described below.

Survey interviews and data collection begin in the week immediately following the reference week. This is referred to as the “survey” week, or the “interview” week, and is usually the week that includes the 19th of the month.

Exceptions to the week of the 12th: The November and December reference weeks are sometimes moved one week earlier so that survey interviewers are not contacting households during major holiday periods.

For December, if the calendar week including the 5th is contained entirely within the month of December, the December reference week will be one week earlier than normal.

For November, the reference week will be moved one week earlier if Thanksgiving falls during the week that contains the 19th, or if the Census Bureau determines that there is not enough data processing time before the survey interview week for December.

Reference weeks for 2020-2021

Active Job Search Methods

Khan Academy: How to Calculate the Unemployment Rate

Active job search methods are defined as those that have the potential to result in a job offer without any further action on the part of the job seeker. Examples of active job search methods include:

  • contacting an employer directly about a job
  • having a job interview
  • submitting a resume or application to an employer or to a job website
  • using a public or private employment agency, job service, placement firm, or university employment center
  • contacting a job recruiter or head hunter
  • seeking assistance from friends, relatives, or via social networks; for example, asking friends and family for job leads or indicating one’s job seeking status on social media
  • checking union or professional registers

Methods that do not constitute an active job search are referred to as passive job search methods. Passive methods are those that could not result in a job offer unless additional steps were taken. Examples include simply looking at job postings without taking further action, or taking a training course.

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Changes To Support You During Covid

Temporary changes have been made to the Employment Insurance program to help you access EI regular benefits. The following changes are in effect until September 2021, and could apply to you:

  • the waiting period may be waived
  • a minimum unemployment rate of 13.1% applies to all regions across Canada
  • if your regions unemployment rate is higher than 13.1%, well use the higher actual rate to calculate your benefits
  • you only need 120 insured hours to qualify for benefits because youll get a one-time credit of 300 insured hours to help you meet the required 420 insured hours of work
  • youll receive at least $500 per week before taxes, but you could receive more
  • youll be eligible for up to 50 weeks of regular benefits
  • if you received the Canada Emergency Response Benefit , the 52-week period to accumulate insured hours will be extended
  • Sections on this page impacted by these temporary changes are flagged as;Temporary COVID-19 relief.

    How To Calculate The Unemployment Rate

    Kimberly Amadeo is an expert on U.S. and world economies and investing, with over 20 years of experience in economic analysis and business strategy. She is the President of the economic website World Money Watch. As a writer for The Balance, Kimberly provides insight on the state of the present-day economy, as well as past events that have had a lasting impact.

    The Balance / Mary McLain

    The unemployment rate formula is the number of unemployed people in the country, divided by the total number of workers available in the civilian labor force. The U.S. Bureau of Labor Statistics has a specific;definition of “unemployed” for determining this percentage.

    You must be;older than age 16 and have been available to work full time during the past four weeks to be counted as unemployed. You must;have actively looked;for work during;that same period.;The only exception is being temporarily laid off and waiting to be called back to a specific job.

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    Whos In Or Out Of The Labor Force

    Should all jobless people, including children, retirees, and college students, be counted as unemployed? Some social situations lend themselves to unintentional unemployment, such as child rearing, poor health, or parental leave, and should not be counted in this group.

    The point is that the adult population is not just divided into employed and unemployed. A third group exists: People who do not have a job, and for some reasonretirement, looking after children, taking a voluntary break before a new jobare not interested in having a job, either. It also includes those who do want a job but have quit looking, often due to being discouraged by their inability to find suitable employment. Economists refer to this third group as out of the labor force or not in the labor force.

    The U.S. unemployment rate, which is based on a monthly survey carried out by the U.S. Bureau of the Census , asks a series of questions to divide up the adult population into employed, unemployed, or not in the labor force. To be classified as unemployed, a person must be without a job, currently available to work, and actively looking for work in the previous four weeks. Thus, a person who does not have a job but who is not currently available to work or has not actively looked for work in the last four weeks is counted as out of the labor force.

    Maximum Contribution And Ei Rate Figures

    How To Measure The Unemployment Rate

    To determine the amount of employment insurance benefit to which you are entitled, here are the variables to consider:

    • TCurrent base rate used to calculate benefits : 55%
    • Maximum insurable annual salary of the employee or the self-employed : 54 200$
    • Unemployment rate depending on your region: Variable
    • Number of insurable working hours: Number of hours of work accumulated during the reference period
    • Number of insurable weeks: The number of weeks depends on the number of hours and the unemployment rate

    It is important to note that employment insurance benefits are taxable!

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    Calculating Alternative Measures Of Unemployment

  • 1Find the number of employed and unemployed people using the federal standards. You can use the federal bureau of labor statistics numbers, which are calculated through a survey of 60,000 households every month.XTrustworthy SourceUS Bureau of Labor StatisticsU.S. government agency that collects and reports labor-related informationGo to source
  • As stated in method one, the number of unemployed workers does not include all those without work, but instead only counts those that have “actively” looked for work in the last four weeks and fit other specific parameters outlined by the federal government.
  • 2Calculate the federal unemployment rate. In order to calculate this percentage you will need to calculate the federal unemployment rate by dividing the number of people who are actively seeking employment, but who cannot find a job, by the total number of people who are employed and those seeking employment. Follow method one to complete this calculation.
  • To calculate those who are unemployed but who have not searched for a job in the last four weeks, the percentage should only include those that want and are available for work, as opposed to those that are permanently unemployed, such as the retired.
  • The US Bureau of Labor Statistics makes this type of data available on their website, in addition to the more traditional data they use for calculating unemployment. It can be accessed at:
  • It Matters For You Whether Youre Working Or Not

    If enough people are out of work for a long enough period of time, social degeneration and political instability are never far behind. But the unemployment rate will impact your life long before your town turns into Mad Max.

    Its a lagging economic indicator. Unlike leading indicators, the unemployment rate reveals a trend that is already happening. By the first Friday of the month when the report comes out, the jobs have already been lost. That means it can tell you if things are getting worse or better and help you plan accordingly.

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    Instead of buying a new fridge, you might instead squirrel away the cash and hold out for another year if the unemployment rate tells you a recession is on the horizon. If youre thinking of changing jobs or taking on work on the side, it can help you gauge how risky the leap might be and how many people youll be competing with. Either way, the unemployment rate is an imprecise but crucial yardstick for measuring the health of the economy and society in general.

    This article is part of GOBankingRates Economy Explained series to help readers navigate the complexities of our financial system.

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    Key Concepts And Summary

    Unemployment imposes high costs. Unemployed individuals suffer from loss of income and from stress. An economy with high unemployment suffers an opportunity cost of unused resources. The adult population can be divided into those in the labor force and those out of the labor force. In turn, those in the labor force are divided into employed and unemployed. A person without a job must be willing and able to work and actively looking for work to be counted as unemployed; otherwise, a person without a job is counted as being out of the labor force. The unemployment rate is defined as the number of unemployed persons divided by the number of persons in the labor force . The Current Population Survey conducted by the United States Census Bureau measures the percentage of the labor force that is unemployed. The establishment payroll survey by the Bureau of Labor Statistics measures the net change in jobs created for the month.

    Example Of Calculating The Unemployment Rate

    Calculating Unemployment & Labor Force Participation Rates

    The following is an example of how to calculate the unemployment rate:

    There are 150 million people in the labor force and a total of 250 million people of working age in a country. There are also 90 million people out of the labor force and eight million people who are unemployed.

    With this information, we can calculate the unemployment rate as follows:

    150 million / 250 million = 0.6Percentage currently employed: 60%

    90 million / 250 million = 0.36Percentage no longer in the labor force: 36%

    8 million / 150 million = 0.053Unemployment rate = 5.3%

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    Calculation Of Employment Insurance Benefits

    Note that our calculator does not take into account the best weeks.

    Regular employment insurance benefits

    Weekly income = or Weekly income = Best weeks annual income / Number of best weeksAverage weekly income = The smallest number between:Weekly incomeand: Weekly benefits = Average weekly income x ) Benefits on the period = Weekly benefits x Number of payable weeks

    Example of Employment Insurance benefits

    John, who lives in Toronto , in the last 52 weeks worked 30 weeks for 40 hours per week, for a total of 1,200 hours, and a total income of $ 30,000.

    Weekly income = 30 000$ / 30 weeks = 1000$Average weekly income = The smallest number between:1000$and: = 1000$Weekly benefits = 1000$ x 55% = 550$Benefits on the period = 550$ x 21 weeks = 11 550$

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