Civilian Unemployment Rate

Definition

What is the Civilian Unemployment Rate?

The unemployment rate for civilian workers is one of the most important and widely discussed series of economic data. In fact, the business cycle of expansion, peak, contraction, and trough expresses itself most prominently in the inflation and unemployment rates. The goals of lowering the inflation and unemployment rates, and of fostering growth, dominate the economic agenda of politicians and policy makers.

The unemployment rate is computed as follows:

[(number unemployed)/(number in the labor force)] X 100.

The Bureau of Labor Statistics (BLS) and Department of Labor estimate the unemployment rate by conducting a monthly survey of 60,000 U.S. households to determine their employment status. The labor force is made up of all people age 16 and above who have been classified as either employed or unemployed. Employed people have jobs, while unemployed people do not have jobs, but are actively seeking work. Children, homemakers, retirees, students, and discouraged former workers who are no longer seeking work are all excluded from the labor force. Thus the unemployment rate is the percentage of the labor force that is out of work and actively looking for work. Because the unemployment rate does not take into account discouraged former workers and people who are underemployed, it is criticized for painting an overly rosy picture of working America.

Economists subdivide unemployment into frictional (due to normal job search by people who have quit or reentered the labor force), structural (due to more permanent changes in the economy that make certain job skills outdated), and cyclical (due to contractions and troughs in the business cycle) components. Since frictional and structural unemployment are unavoidable aspects of a dynamic market economy, economists refer to full employment as occurring when cyclical unemployment is equal to zero. A similar concept, the natural unemployment rate, is the minimum unemployment rate that can be sustained without accelerating inflation. The U.S. unemployment rate reached a 20th century peak of 25 percent during the deepest trough of the Great Depression in the 1930's. Omitting the Great Depression, U.S. unemployment rates have averaged about five or six percent during the 20th century.

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