The unemployment rate is a vital economic indicator, providing a snapshot of the labor market. Unemployment rates are commonly used to identify potential economic problems and spur policy action. However, a high unemployment rate can cause more than just a loss of income; it can also have serious psychological effects on those who lose their jobs. Unemployment can lead to depression, insomnia, feelings of helplessness and low self-esteem, as well as malnutrition, increased risk of cardiovascular disease, and addictions like gambling and alcoholism.
The Bureau of Labor Statistics calculates the unemployment rate by conducting a monthly survey to identify people who are employed and actively seeking work. The survey excludes those who are unable to find full-time work for reasons such as family responsibilities or retirement. This definition of the labor force can obscure true demand for employment, especially when companies reduce staffing as a way to cut costs.
Structural unemployment can result from changes in the industrial composition of a region, or when workers lack the skills necessary for a new type of job. For example, advances in computer technology caused the newspaper industry to lay off journalists and production workers as online advertising replaced traditional revenue streams. This structural unemployment increased the overall unemployment rate, even though it was not due to a decrease in demand for labor.
Governments track the unemployment rate to ensure that there is sufficient employment for all those who want to work. However, the current unemployment rate in the United States is far higher than it should be – and there are several factors that contribute to it.