Unemployment is the percentage of people without jobs who are actively looking for work. The rate is determined at the national, state, and regional levels via labor-force surveys conducted by the government. It is based on the number of unemployed individuals divided by the total labor force and multiplied by 100. The rate can be influenced by various factors, including recessions, technological improvements, and the ebb and flow of workers voluntarily leaving one job for another (see also unemployment gap). The U.S. Bureau of Labor Statistics categorizes the unemployed into six groups, with U3 being the most widely recognized measure of long-term unemployment.
At a macroeconomic level, high unemployment reduces consumer spending, which lowers the demand for goods and services and causes a cycle of reduced production, layoffs, and economic stagnation. It also places a burden on the welfare system and tax revenues. At the community level, it can result in higher crime and social unrest and contribute to a sense of hopelessness.
Although the headline unemployment rate is an important indicator of the health of the economy, it is misleading in many ways because it only includes those who are actively looking for work. The true picture of unemployment is a much more complicated story and can be described as frictional unemployment, structural unemployment, and the natural rate of unemployment. The latter is the rate that would occur under normal economic conditions, excluding recessions. It is influenced by the strength of unions, employment laws, and labor market institutions that influence worker bargaining power and the supply of skills.