Measurement and Effects of Unemployment

Unemployment rate is calculated by dividing the number of unemployed workers with the total number of workers in the labor force. It is a lagging indicator which measures the effect of the recession when experienced by a nation. Recession is the condition in which a country experiences two or more consecutive quarters of declining output in goods and services, more economically referred as the Gross Domestic Product (GDP)

In measuring the unemployment rate, statisticians and economists consider two figures: the totality of the labor force which comprises the employed and unemployed, and the unemployed workers. They divide the latter with the former, multiply it to 100%, and then they get the unemployment rate for the past month. Reports of the surveys made by about 2,000 employees of the Bureau of Labor Statistics are released every first Friday of each month.

The unemployment rate is basically an indicator of the country’s lack of supply for jobs. It means that when the rate is high, the number of people with no jobs is also high. Thus, it also measures the growth rate of the country’s economy. When people have no jobs, they do not have means to pay for basic commodities. Eventually, suppliers of goods and services will also suffer due to weakening purchasing power of consumers. On a bigger scale, unemployment affects the U.S. economy.

On a smaller scale, unemployment also affects individuals like you. When there are more people looking for work in the middle of lesser supply for jobs, people will postpone excessive purchases and so the retail sector will be greatly affected. Workers in the business of manufacturing, producing and selling will earn below their expectations. If you are also unemployed, you will discover a stiffer competition in your field. You have not much influence in negotiating positions and salaries.