The unemployment rate is a key economic indicator that provides insight into the health of an economy’s job market and overall economy. The unemployment rate measures the percentage of the civilian population that does not have a job and is actively seeking employment. The Bureau of Labor Statistics (BLS) calculates the unemployment rate through a monthly survey that includes people who are employed, unemployed, or marginally attached to the labor force (such as those working part time because of family or childcare obligations).

There are several different ways to measure unemployment; however, most policymakers use the U-3 measurement that is based on the number of individuals who do not have a job and have actively searched for work in the past four weeks. Other metrics, such as the U-6 measurement that also include discouraged workers and those who are marginally attached to the labor force, provide additional insight into the state of an economy’s job market.

High levels of unemployment negatively affect the economy in a number of ways. For one, they reduce consumer spending, which makes up about 70% of GDP. In turn, reduced consumption reduces the demand for goods and services, which leads to layoffs. This creates a cycle of reduced production, layoffs, and lower spending that can lead to economic stagnation.

In addition, the stress of unemployment can take a toll on individuals’ mental and physical health. For example, research conducted by Penn State found that those who had experienced long or frequent periods of unemployment had poorer health by the age of 50 than those who had been steadily employed.