Unemployment Rate

What is the unemployment rate?

The unemployment rate measures the share of the labor force that is jobless, available for work, and actively seeking employment. It is a key lagging indicator of economic health and is widely used by policymakers, businesses, and investors.

Key point: the commonly reported national unemployment figure in the U.S. is the U‑3 rate, published monthly by the Bureau of Labor Statistics (BLS).

Key takeaways

• The unemployment rate equals: (Number of unemployed people actively seeking work ÷ Civilian labor force) × 100.
• The U‑3 (headline) unemployment rate is most often cited; broader measures of labor underutilization are labeled U‑1 through U‑6.
• The BLS seasonally adjusts the unemployment rate to remove predictable calendar-driven swings.
• The unemployment rate for May 2025 was 4.2%.

How the BLS defines employed vs. unemployed

• Employed: people with paid jobs (full- or part-time), those who work at least 15 unpaid hours in a family business/farm, or those temporarily absent from a job.
• Unemployed: people without a job who are available for work and have actively looked for work in the past four weeks.
• Not in the labor force: people not working and not actively seeking work (including discouraged workers who stopped searching).

Alternative measures (U‑1 through U‑6)

The BLS publishes six measures of labor underutilization to capture different aspects of joblessness:

• U‑1: Long-term unemployed (jobless 15 weeks or more) as a percent of the labor force. (May 2025: 1.5%)
• U‑2: Job losers and people who completed temporary jobs as a percent of the labor force. (May 2025: 2.0%)
• U‑3: Official unemployment rate — unemployed, available, and actively seeking work within the past four weeks. (May 2025: 4.2%)
• U‑4: U‑3 plus discouraged workers (those who believe no jobs are available for them). (May 2025: 4.5%)
• U‑5: U‑4 plus marginally attached workers (those who looked for work in the past 12 months but not in the past four weeks). (May 2025: 5.1%)
• U‑6: Broadest measure — unemployed + marginally attached + part‑time for economic reasons (involuntary part‑time) as a percent of the labor force plus marginally attached. Often called the “underemployment” rate. (May 2025: 7.8%)

How unemployment data are collected

• The Current Population Survey (CPS), conducted monthly by the Census Bureau for the BLS, samples about 60,000 households (roughly 110,000 individuals).
• The survey gathers employment status, industry, occupation, earnings, union membership, and demographic details (age, race, gender, veteran status).
• The sample rotates so many households are re-surveyed over time to track changes.
• Certain populations are excluded: people under 16, active-duty military, and residents of institutional group quarters (e.g., prisons, long‑term mental health facilities).

Unemployment and the economy

• Unemployment is monitored alongside GDP and inflation (CPI) to assess economic health.
• Low unemployment typically raises wage pressure as labor supply tightens, which can contribute to inflation.
• Low unemployment often supports higher consumer spending and can boost stock markets; conversely, high unemployment reduces spending and can slow growth.
• Economists generally view an unemployment range of roughly 3%–5% as consistent with a healthy, balanced labor market, though no single threshold is definitive.

Frequently asked questions

Q: What’s the difference between U‑3 and U‑6?
A: U‑3 is the headline unemployment rate (actively searching in past four weeks). U‑6 is broader and includes marginally attached workers and those working part‑time for economic reasons.

Q: How often is the unemployment rate released?
A: The BLS releases U.S. unemployment data monthly, typically in the Employment Situation report.

Q: Why use seasonally adjusted rates?
A: Seasonal adjustment removes predictable calendar effects (e.g., holiday hiring) to reveal underlying trends.

Bottom line

The unemployment rate is a fundamental indicator of labor market conditions. While the U‑3 rate is the most cited, alternative measures (U‑1 through U‑6) provide important context about long‑term unemployment, underemployment, and labor force attachment. Policymakers use these measures to guide decisions on monetary and fiscal policy because changes in unemployment affect wages, inflation, household spending, and overall economic activity.