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Definition
An unemployed individual is someone who wants to work, is capable of working, and is actively seeking work. The unemployment rate is the percentage of unemployed workers in the total labor force. Economist Arthur Okun studied unemployment data and GDP from 1930 through 1980 and observed that rises in GDP are directly related to a lowering of the unemployment rate. In other words, in a growing economy, the unemployment rate falls. In a stagnating or recession economy, the unemployment rate will rise.
Problems with the Statistic
The unemployment rate in an imperfect statistic and does not accurately reflect the state of the workforce. The rate does not include those individuals who have given up looking for work. It does not account for those that have had to accept lower paying jobs. There is no accounting for part time employees who would prefer full time work but can't find it. The rate doesn't account for those who have accepted contract positions but would prefer a permanent position. There's no denying that a lower unemployment rate indicates a stronger economy, but the rate itself is an imperfect measurement.
The United States
We are in the midst of a major economic recession. Naturally the unemployment rate has fallen. In an April 3rd article on the MSN Money site, it was reported that the unemployment rate is 8.5% which would be the worse since the recession of the early 1980s. Worse yet, when the people who are in the circumstances mentioned in the problems section above are counted, the rate balloon even further. In other words, the real unemployment rate might be as high as 15.6%. I don't know about you, but I find that number shocking.
Further Reading
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