Unemployment is one of the most important economic indicators. When the unemployment rate is high, businesses have fewer customers and consumers have less money to spend on goods and services. This can cause a downward spiral in which businesses lay off workers, consumers stop spending, and the economy slows down.
However, not all jobless people are considered unemployed. In order to be counted, a person must be out of work, actively searching for employment, and available to accept a job if one were offered. This criteria is measured by the labor force participation rate (LFPR), which is calculated as the percentage of the eligible population that is a member of the workforce and looking for work. The official unemployment rate, released monthly by the U.S. Bureau of Labor Statistics (BLS), is based on a monthly survey called the Current Population Survey (CPS). The CPS collects information about individuals, including their current job status, their reason for being out of work, and their methods of searching for jobs.
The BLS publishes several measures of the health of the economy, including the unemployment rate and the number of job openings. As COVID-19 continues to ravage the country, these indicators may not reflect reality in the same way as they would in normal times. For example, the number of people who are not in the labor force because they have stopped looking for a job skyrocketed during the COVID-19 pandemic. This figure can skew the overall picture of unemployment because it leaves out individuals who would be able to find a job in normal times but have stopped looking due to their family’s financial needs, pandemic-related job loss, or other reasons.