The unemployment rate measures the percentage of people who are jobless and available for work. It’s an important indicator of the health of a nation’s economy. Experts debate how to best measure unemployment and what causes it, but most agree that high levels of it are bad for the economy. High unemployment reduces consumer spending, which slows growth. It also puts a strain on governments through increased reliance on welfare programs and reduced tax revenue. In addition, it can lead to social unrest and erode community cohesion.
Many people who want to work aren’t counted in the official unemployment statistics, which use a short reference period. That includes students and homemakers. It also excludes those who have given up looking for jobs. Those discouraged workers are one reason why official unemployment rates often understate the true demand for labor in a country.
In addition to the officially recognized unemployment rate, some countries also track an underemployment rate. This includes discouraged workers as well as involuntary part-time workers and those who would prefer full-time employment but have to settle for less than that.
When a country’s unemployment rate is high, it’s often a sign of a recession. In that case, the federal government may employ various fiscal policies to try to boost economic activity and lower unemployment. These might include expanding government spending in targeted industries, increasing unemployment benefits and providing subsidies for unemployed people. In the past, such policies have helped to get the unemployment rate down quickly during a recession by putting workers back to work.