Unemployment rate is the percentage of the labor force that is unemployed and actively looking for work.
Formula:
Important distinction:
- It is based on the labor force, not the total population.
- People not working and not seeking work are not counted as unemployed.
Why it matters:
- Rising unemployment usually signals weaker economic activity.
- Falling unemployment often appears during a business-cycle expansion.
This note is most useful alongside Business Cycle and GDP.