The unemployment rate is a key indicator of the health of a country’s labor market. It describes the underutilization of a nation’s workforce and helps to set monetary policy, guide government spending, and inform investors about the future of the economy.
But there are several different ways to measure joblessness. The official statistics, known as U-3, focus on out-of-work Americans who have actively looked for jobs in the past four weeks. The more comprehensive statistic, U-5, adds to that by including discouraged workers, who have stopped looking because they believe no work is available for them. Another measure, U-6, adds people who are employed part time but would prefer full-time work to the mix.
In addition, individual countries may define who is out of the workforce differently. For example, in some European countries, individuals who choose not to work due to childcare responsibilities or illness are not counted as unemployed. In the United States, individuals who have dropped out of school are not considered unemployed.
Despite these complications, there is one statistic that cuts through all of this confusion and provides an accurate picture of joblessness: the comprehensive jobless rate. This metric, which EPI is introducing in this article, incorporates all of the official statistics to provide a clear and comprehensive measure of joblessness. It is also more comparable to the unemployment rates of other countries, making it a useful benchmark for international comparisons. This more complete picture of joblessness also allows us to see that the current economy is not nearly as bleak as many pundits have warned, even during the COVID-19 pandemic.