How the unemployment rate is actually calculated

unemployment rate

We are a week and a half away from September’s unemployment number. A number that will be important for this market that seems to be topping out.

Most people assume that the government has access to all of the employment data across the nation at their finger tips.

Therefore most people believe that the unemployment rate is the most accurate portrayal available of the United States job market.

However, there are several things that most Americans may not realize about the unemployment number. The number that is used so often by the press as the official statistic of the level of employment in the US.

First of all the United States non-farm payroll employment number is an estimate. It is determined by polling a select cross section of Americans by sending out paper forms or by conducting phone interviews.

Secondly, in order to be considered unemployed, a citizen has to meet several criteria. To be considered unemployed a US citizen has to be completely out of work, actively seeking work and available to take work should it be offered to them.

The unemployment number leaves out the true picture of the economy in several ways

They do not figure in those who are able to take work but have simply stopped looking for work. They have resigned themselves to the lifestyle afforded to them by the social safety net.

The unemployment number does not include those who are drastically under employed. Some of these individuals are underemployed to the point that they need to receive government assistance. They receive government assistance even though they have a job. Walmart famously had a large percentage of their employee pool receiving some type of government assistance.

And then there are the disabled. There are several levels of disabled. There are those that clearly cannot work. And there are those who at one point clearly could not work and then they continue to milk the government system beyond their point of being incapable of performing any work.