How The U.S. Jobless Rate Is Calculated

Filed under: Questions from You

Planet Money listener and reader Eric Sipple has a question about how the U.S. jobless rate is calculated. It's a timely one: this morning, we found out the jobless rate spiked to 6.5%, its highest level in 14 years.

How is the U.S. Jobless rate calculated? Is this based entirely on who is collecting unemployment insurance, or is there a more complicated calculation that takes place? When we say 1 in 10 Americans are out of work, are we saying 1 in 10 Americans who previously were working are out, or 1 in 10 total Americans?

In short, the unemployment rate tells you the percent of the labor force that is unemployed. But like many people, Eric wonders if the number is based on the number of people filing for unemployment insurance. Unfortunately, that wouldn't work because some people who have run out of unemployment benefits could still be unemployed, undercutting the actual unemployment number.

The unemployment rate figures that are published on a monthly basis are actually derived from a monthly survey of 60,000 households in the United States known as the Current Population Survey. The survey is conducted by the Census Bureau on behalf of the Bureau of Labor Statistics.

While 60,000 households may not seem like a lot in comparison to the millions of households in the United States, the survey is intended to be a representative of the complete population of the U.S. That information is then compared as a percentage to the number of people in the labor force and, voila, we have the unemployment rate.

It should be noted that the labor force is considered to be all individuals who are age 16 and older who either have a job or who are actively looking for a job. Individuals who do not have a job and who are not actively looking for work are not included in the labor force.

Daniel Costello

2:26 PM ET | 11- 7-2008 | permalink

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