US Unemployment Rate is Determined by a Survey

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In simple terms, the unemployment rate is the number of people looking for work divided by the total number of people in the labor force.  But how is the number of people looking for work calculated?

Some people think that to get these figures on unemployment, the Government uses the number of persons filing claims for unemployment insurance (UI) benefits under State or Federal Government programs. But some people are still jobless when their benefits run out, and many more are not eligible at all or delay or never apply for benefits. So, quite clearly, UI information cannot be used as a source for complete information on the number of unemployed.
 
Other people think that the Government counts every unemployed person each month. To do this, every home in the country would have to be contacted—just as in the population census every 10 years. This procedure would cost way too much and take far too long. Besides, people would soon grow tired of having a census taker come to their homes every month, year after year, to ask about job-related activities.
 
Because unemployment insurance records relate only to persons who have applied for such benefits, and since it is impractical to actually count every unemployed person each month, the Government conducts a monthly sample survey called the Current Population Survey (CPS) to measure the extent of unemployment in the country.

The CPS has been conducted in the United States every month since 1940, when it began as a Work Projects Administration project. It has been expanded and modified several times since then.

With the data acquired from the Current Population Survey, early each month, the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor announces the total number of employed and unemployed persons in the United States for the previous month, along with many characteristics of such persons.

Keep in mind that the unemployment rate that we hear most often in the media (October ’09 was 10.2% & reported in Nov. ‘09) is lower than the actual unemployment rate because the calculation does not take into consideration those that are “underemployed” or have simply given up looking for work.