The Unemployment Rate And How To Calculate It
The Frances Perkins Building of the U.S. Department of Labor headquarters in Washington, D.C. (Ed Brown/Public domain)
What is the unemployment rate?
The unemployment rate is the percentage of the labor force out of work and actively looking. But before we get to how the rate is calculated, let’s talk about what unemployment looks like for you.
Yeah, that’s right, you know how it is: unemployment is not the prettiest state of being. You’ve probably felt it when 16 or older, out of a job, and searching for one.
But to obtain a statistic, the government can’t look at unemployment case-by-case; it has to employ statistics and take samples. This is done monthly through the Current Population Survey (CPS), which has been in place since 1940. A lot of current population measures came out of the Great Depression, ya know – people were really spooked and sensitive, so they took to some semblance of stability in statistics.
How is the unemployment rate calculated?
Get ready for an overload of acronyms: Every month, the Bureau of Labor Statistics (BLS) calculates the CPS. If you’re over 16, out of work, and looking, BLS considers you a part of the unemployed labor force, and uses you in the CPS as part of the numerator to be divided by the denominator of the entire labor force, employed and unemployed alike. Remember division? Super fun.
So, because the unemployment rate is updated monthly, and March 2020’s is at 4.4 percent, this means that we have some parts of the math puzzle. Let’s do a sample equation.
This means that in this simulation of BLS’s sample, 4,400 were identified as unemployed, through a series of carefully-crafted survey questions. Again, if you are out of work but not looking for a job, you are not involved in any part of these numbers.
What is unemployment insurance?
As we see above, and maybe contrary to popular belief, unemployment insurance (UI) is not the sole factor used in calculating the unemployment rate. Why? “Some people are still jobless when their benefits run out, and many more are not eligible at all or delay or never apply for benefits. So, quite clearly, UI information cannot be used as a source for complete information on the number of unemployed,” according to BLS.
But if you’re interested in unemployment insurance, you apply for it based on your state, and must meet certain eligibility requirements; that is, you couldn’t have quit, been fired on a cause, or be self-employed.
Your insurance payments should, on average, make up half of your regular paycheck for at least 26 weeks, two-to-three weeks after you are approved. This is all funded using taxes paid by employers. The CARES Act passed during the COVID-19 pandemic increased these benefits dramatically, with many workers seeing 100% of their wages guaranteed. Click here to learn more about applying.
Trump And Obama’s Unemployment Rates Compared
Trump often boasts about having improved the economy, as if fulfilling his red-hat MAGA prophecy. But when considered with the 15 measures explained here, he seems to be taking his administration out of context, just as many Republicans took Obama’s policies out of the context of his predecessor, whose presidency ended with the 2008 recession.
For example, Trump talks of reducing unemployment, but BLS records a continuous decline since the first years of Obama’s administration. More specifically, in January 2010, unemployment was at 9.8%; in 2014, 6.6%; and in 2016, 4.9%. Since Trump took office in 2017, the unemployment rate has continued to decline, but not on as steep of a slope – as of January 2020, it landed at 3.6%.
Unemployment Trends Over The Past 60 Years
In the table below, you’ll find average unemployment rates by presidency (average between 4 to 8 years, depending) since the 1960s. This table and its statistics are pieced together to offer a wider context.
| Issue | Biden |
| Kennedy |
5.96 |
| Johnson |
4.18 |
| Nixon |
5.03 |
| Ford |
7.84 |
| Carter |
6.54 |
| Reagan |
7.51 |
| Bush |
6.34 |
| Clinton |
5.17 |
| W. Bush |
5.31 |
| Obama |
7.44 |
| Trump |
4.8 |
(Data source)
As this table sums up sums, we can see the statistic in the long-term, speculating as to how each presidency relates to each average unemployment rate within the last 60 years.
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The Rantt Rundown
Here, we’ve hashed out definitions, numbers, statistics, and historical trends. Some key takeaways:
Unemployment is defined as the labor force, 16 and over, that is available for work.- The unemployment rate is calculated as the percent of the entire labor force, currently employed and unemployed, out of the job and looking.
- You can apply for unemployment insurance in the state where you worked, given eligibility requirements, and expect to receive about half of your regular wage for 26 weeks, a couple of weeks after approval. These benefits are now higher due to COVID-19.
- Unemployment trends have been steadily declining, regardless of Trump’s apparent belief in himself as the sole factor.
- Unemployment trends can be studied by presidency, but should not be completely attributed to presidents, and instead seen in context.
Note: Unemployment rates are controversial; many doubt the veracity of their measurements. The New York Times proposes alternative calculations here.
