The unemployment rate is a percentage, not a count of jobless people

The unemployment rate you see in news reports — "unemployment at 3.8%" — is not the number of people without jobs. It is the percentage of people actively looking for work who cannot find it. The U.S. Bureau of Labor Statistics (BLS) calculates this by dividing the number of unemployed people by the total labor force, then multiplying by 100.

This matters because the labor force is smaller than the total population. It excludes children, retirees, students not looking for work, people with disabilities who are not seeking employment, and anyone else not actively job-hunting. So a country where millions stop looking for work can show a lower unemployment rate even though fewer people have jobs.

The BLS publishes the official rate monthly, usually on the first Friday of each month. The data comes from two separate surveys: one that counts jobs, and one that asks households whether they are working or looking for work.

Key Takeaways

  • The unemployment rate is calculated by dividing the number of unemployed people by the total labor force, not by the total population.
  • To be counted as unemployed, you must be without a job, available to work, and actively searching — not just wanting work.
  • The BLS conducts a household survey of about 60,000 homes each month to count unemployed people and measure the labor force.
  • The official rate does not include discouraged workers who have stopped looking, so alternative measures like U-6 paint a different picture.
  • State and local unemployment rates are calculated the same way but use different data sources and are released with a lag.

Who counts as unemployed in the BLS calculation

The BLS does not count everyone without a job as unemployed. To be counted in the official unemployment rate, you must meet three conditions at the same time: you have no job, you are available to start work when ready, and you have taken a specific step to look for work in the past four weeks.

That last part is strict. Looking for work means you contacted an employer, visited a job site, sent a resume, interviewed for a position, or registered with a public or private employment agency. Wanting a job, or passively browsing job listings, does not count. Neither does being on a waiting list for a job you applied for months ago.

The BLS also excludes people who are temporarily laid off but expect to return to their job within six months. They are counted as unemployed only if they have taken active steps to find other work during the layoff.

How the labor force is defined and counted

The labor force is the denominator in the unemployment rate formula. It includes all people age 16 and older who are either employed or actively looking for work. It does not include anyone younger than 16, people over 65 who are not working, full-time students, retirees, people with disabilities who are not seeking work, or anyone else outside the job market.

When people stop looking for work — because they are discouraged, going back to school, caring for family, or for any other reason — they leave the labor force. The labor force shrinks. This is why the unemployment rate can fall even when job creation is flat: if enough people stop searching, the rate improves mathematically, even though the job market has not.

The BLS estimates the labor force each month using the Current Population Survey (CPS), a survey of about 60,000 households. The survey asks whether each person age 16 and older is working, looking for work, or out of the labor force. From this sample, the BLS projects the total labor force for the entire country.

The two BLS surveys that feed the unemployment rate

The unemployment rate comes from two separate monthly surveys that measure different things. Understanding both helps explain why the rate sometimes seems disconnected from what you hear about hiring.

The Current Population Survey (CPS), also called the household survey, asks about 60,000 households whether people are employed, unemployed, or out of the labor force. From this, the BLS calculates the unemployment rate, the labor force participation rate, and the employment-to-population ratio. The CPS is released on the first Friday of each month and covers the week that includes the 12th of the month.

The Current Employment Statistics (CES), also called the payroll survey, contacts about 145,000 businesses and government agencies and asks how many people they employed in the past month. This produces the headline "jobs added" or "jobs lost" figure you hear in news reports. The CES is more precise for counting jobs but does not measure unemployment, because it does not ask whether people are looking for work.

Both surveys have margins of error. The CPS unemployment figure can swing by 0.2 percentage points in either direction due to sampling variation alone. The CES jobs figure has a standard error of about 110,000 jobs per month.

Why the unemployment rate fell even when fewer people were working

Between 2020 and 2023, the official unemployment rate fell sharply while the labor force participation rate — the share of the population that is working or looking for work — also fell. This seemed contradictory until you account for who left the labor force.

When people retire early, leave the workforce to care for children or aging parents, or stop looking for work because they are discouraged, they are no longer counted in either the numerator (unemployed) or the denominator (labor force). The unemployment rate can fall because the denominator shrank, not because more people found jobs.

This is why the BLS publishes alternative unemployment measures alongside the official rate. The U-6 rate includes people who have stopped looking but say they want to work, as well as people working part-time who want full-time jobs. The U-6 is always higher than the official rate because it counts more people as underemployed or discouraged.

State and local unemployment rates use the same method

Every state publishes its own unemployment rate each month, calculated the same way as the national rate: unemployed people divided by the state labor force. However, state rates are based on smaller samples and are released with a one-month lag. The national rate for June is released in early July; state rates for June are released in early August.

Some states and large cities also publish local area unemployment statistics (LAUS) for counties and metropolitan areas. These use a blend of the household survey, payroll data, and state unemployment insurance claims to estimate local labor force and unemployment. The smaller the area, the less reliable the estimate.

State rates are useful for comparing regional job markets, but they have larger margins of error than the national rate. A state unemployment rate of 4.5% might actually be anywhere from 4.2% to 4.8% due to sampling variation.

What the unemployment rate does not tell you

The official unemployment rate is a narrow measure. It tells you what share of people actively looking for work cannot find it, but it does not tell you how long people have been unemployed, whether they found part-time work instead of full-time, or whether they have given up looking.

Someone who has been unemployed for two years and someone who lost a job last week are both counted the same way. A person working 10 hours a week is counted as employed, even if they need full-time income. A person who looked for work six months ago but stopped is not counted at all.

The BLS publishes supplemental data each month to fill these gaps: the average duration of unemployment, the number of long-term unemployed (27 weeks or more), the underemployment rate, and the number of discouraged workers. These are available on the BLS website but receive far less media attention than the headline unemployment rate.

Frequently Asked Questions

Why does the unemployment rate sometimes go down when jobs are being lost?

The unemployment rate can fall if people leave the labor force faster than jobs are lost. If 100,000 people stop looking for work and 50,000 jobs disappear, the unemployment rate falls because the denominator (labor force) shrinks. This happened in 2020 when many people left the workforce due to pandemic-related concerns, school closures, and early retirement.

What is the difference between the unemployment rate and the labor force participation rate?

The unemployment rate measures the share of the labor force that is jobless and looking for work. The labor force participation rate measures what share of the total population age 16 and older is either working or actively looking for work. A falling participation rate means people are leaving the job market, which can mask a weak labor market even if unemployment appears stable.

How often is the unemployment rate updated?

The national unemployment rate is released monthly on the first Friday of each month, covering the previous month's data. State rates are released on the third Friday of each month, with a one-month lag. The BLS also revises the previous two months' figures each time new data arrives, so the rate you see today may be adjusted upward or downward next month.

Is the unemployment rate the same as the jobless rate?

No. The jobless rate would be the share of the total population without a job. The unemployment rate is the share of the labor force without a job. Because the labor force excludes retirees, students, and others not seeking work, the unemployment rate is always lower than the jobless rate would be.

What does U-6 unemployment mean?

U-6 is an alternative unemployment measure that includes the officially unemployed, plus people working part-time who want full-time work, plus people who want to work but have stopped looking. The U-6 rate is always higher than the official rate and gives a broader picture of labor market weakness. The BLS publishes U-6 data monthly alongside the official rate.