Unemployment is a key economic indicator that measures the number of people who have lost their jobs or are not currently working and looking for work as a percentage of the total workforce. High unemployment rates can cause economic stagnation, as businesses cut back on production in order to save money and consumers reduce their spending. This can lead to a vicious cycle of reduced output, layoffs and more unemployment. It can also strain government resources, leading to increased reliance on social welfare programs and lost tax revenue. It can also erode community cohesion and create an atmosphere of hopelessness that can persist long after employment levels have recovered.
There are a variety of ways to measure unemployment, and different definitions can lead to different results. The most well-known is the official unemployment rate, which measures only those who are jobless and actively seeking employment. This excludes students, retirees and others who have dropped out of the workforce in order to care for family members or pursue other interests. Other measurements of unemployment exist that include all those who want a job but have not searched for one in the past four weeks, including discouraged workers and those who are marginally attached to the workforce.
The unemployment rate is based on a monthly survey of households conducted by the Census Bureau on behalf of the Labor Department. The sample of 60,000 eligible households is randomly selected each month. This allows for a 90% probability that the monthly estimate of unemployment will be within 130,000 of the figure obtainable from a sample of the total population.