Unemployment

The unemployment rate is one of the most important statistics of the performance of a country's economy. Most economists agree that a rate of 4.5 percent constitutes "full employment" levels, and a rate higher than this is a cause for concern. The unemployment rate is released monthly by most countries and uses various methods of data collection. Before we discuss what the unemployment rate is, we need to look at some other terms that will help us have a better understanding of unemployment.

An unemployed individual is an individual defined as being out of work or the reference period, which is usually the previous four weeks; is currently available for work; and has been actively looking for a job during the reference period. People temporarily laid off from their jobs and waiting to be called back to work are also classified as unemployed.

In order to calculate the unemployment rate, countries need to determine the number of that countries labor force. The labor force consists of the following: the unemployed work force and those who are employed. Now there are certain individuals whom are not counted as part of the labor force. These individuals would be those that are not working and are not actively looking for work. This would also include all individuals that are younger than the age of 16 (in most countries), retired people, those who may be confined to institutions (medical or criminal), armed forces personnel and those who cannot work due to family obligations. Self-employed people or those who did at least 15 hours of unpaid work for a family-owned enterprise are also counted in the labor force as employed.

Now you might be asking yourself, “How is all of this data collected to determine the actual unemployment rate?” Well there are different methods of collecting this data by different countries around the world. The most common, of course, is to use "Labor Force Sample Surveys". This is where a certain number of households in...