Unemployment in the United States discusses the causes and measures of U.S. unemployment and strategies for reducing it. Job creation and unemployment are affected by factors such as economic conditions, global competition, education, automation, and demographics. These factors can affect the number of workers, the duration of unemployment, and wage levels.
Overview Unemployment generally falls during periods of economic prosperity and rises during recessions, creating significant pressure on public finances as tax revenue falls and social safety net costs increase. Government spending and taxation decisions (fiscal policy) and U.S. Federal Reserve interest rate adjustments (monetary policy) are important tools for managing the unemployment rate. There may be an economic trade-off between unemployment and inflation, as policies designed to reduce unemployment can create inflationary pressure, and vice versa. The U.S. Federal Reserve (the Fed) has a dual mandate to achieve full employment while maintaining a low rate of inflation. The major political parties debate appropriate solutions for improving the job creation rate, with liberals arguing for more government spending and conservatives arguing for lower taxes and less regulation. Polls indicate that Americans believe job creation is the most important government priority, with not sending jobs overseas the primary solution.
Unemployment can be measured in several ways. A person is defined as unemployed in the United States if they are jobless, but have looked for work in the last four weeks and are available for work. People who are neither employed nor defined as unemployed are not included in the labor force calculation. For example, as of September 2017, the unemployment rate (formally defined as the "U-3" rate) in the United States was 4.2% representing 6.8 million unemployed people. The unemployment rate was calculated by dividing the number of unemployed by the number in the civilian labor force (age 16+, non-military and not incarcerated) of approximately 159.6 million people, relative to a U.S. population of approximately 326 million people. The historical average unemployment rate (January 1948-September 2020) is 5.8%. The government's broader U-6 unemployment rate, which includes the part-time underemployed was 8.3% in September 2017. Both of these rates fell steadily from 2010 to 2019; the U-3 rate was below the November 2007 level that preceded the Great Recession by November 2016, while the U-6 rate did not fully recover until August 2017.
The U.S. Bureau of Labor Statistics (BLS) publishes a monthly "Employment Situation Summary" with key statistics and commentary. As of June 2018, approximately 128.6 million people in the United States have found full-time work (at least 35 hours a week in total), while 27.0 million worked part-time.FRED-Employed FT and PT-Retrieved July 24, 2018 There were 4.7 million working part-time for economic reasons, meaning they wanted but could not find full-time work, the lowest level since January 2008.FRED-Employment Level Part Time for Economic Reasons All Industries-Retrieved July 24, 2018
The vast majority of persons outside the civilian labor force (age 16+) are there by choice. The BLS reported that in July 2018, there were 94.1 million persons age 16+ outside the labor force. Of these, 88.6 million (94%) did not want a job while 5.5 million (6%) wanted a job.BLS-Labor Force Statistics from the current population survey-Table A-38 Key reasons persons age 16+ are outside the labor force include retired, disabled or illness, attending school, and caregiving. The Congressional Budget Office reported that as of December 2017, the primary reason for men age 25–54 to be outside the labor force was illness/disability (50% or 3.5 million), while the primary reason for women was due to family care-giving (60% or 9.6 million).CBO-Factors Affecting Labor Force Participation of People Ages 25-54-February 7, 2018
The Congressional Budget Office estimated that the U.S. was approximately 2.5 million workers below full employment as of the end of 2015 and 1.6 million at December 31, 2016, mainly due to lower labor force participation. This was very close to full employment, indicating a strong economy. As of May 2018, there were more job openings (6.6 million) than people defined as unemployed (6.0 million) in the U.S.FRED-Unemployment level and Job Openings-Retrieved June 22, 2018FRED-Unemployment Level-Retrieved July 2018
In September 2019, the U.S. unemployment rate dropped to 3.5%, near the lowest rate in 50 years. On May 8, 2020, the Bureau of Labor Statistics reported that 20.5 million nonfarm jobs were lost and the unemployment rate rose to 14.7 percent in April, due to the Coronavirus pandemic in the United States.
Definitions of unemployment
The U.S. Bureau of Labor Statistics has defined the basic employment concepts as follows: People with jobs are employed. People who are jobless, looking for jobs within the last 4 weeks, and available for work are unemployed. People who are neither employed nor have looked for a job within the last 4 weeks are not included in the labor force.
Employed Employed persons consist of: All people who did at least one hour of work for pay or profit during the survey reference week. All people who did at least 15 hours of unpaid work in a family-owned enterprise operated by someone in their household. All people who were temporarily away, whether they were on vacation, sick, or laid off from their regular jobs, including paid or unpaid absences.
Full-time employed persons work 35 hours or more, considering all jobs, while part-time employed persons are defined as working fewer than 35 hours.
Unemployed Who is counted as unemployed? People are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Workers expecting to be recalled from layoff are sometimes counted as unemployed, depending on the specific interviewer. They are expected to be counted whether or not they have engaged in a specific job-seeking activity. In all other cases, the individual must have been engaged in at least one active job search activity in the 4 weeks preceding the interview and be available for work (except for temporary illness) in order to be counted as unemployed.
The number of people collecting unemployment benefits is much lower than the actual number of unemployed people, since some people are not eligible, or do not apply.
Labor force Who is not in the labor force? Persons not in the labor force are those who are not classified as employed or unemployed during the survey reference week. Labor force measures are based on the civilian noninstitutional population 16 years old and over. (Excluded are persons under 16 years of age, all persons confined to institutions such as nursing homes and prisons, and persons on active duty in the Armed Forces.) The labor force is made up of the employed and those defined as unemployed. Expressed as a formula, the labor force equals employed plus unemployed persons. The remainder (those who have no job and have not looked for one in the last 4 weeks) are counted as "not in the labor force." Many who are not in the labor force are going to school or are retired. Family responsibilities keep some others out of the labor force. "Marginally attached" workers are those not in the labor force because they have not searched for a job in the 4 weeks prior. However, they have searched for work in the prior 12 months and are both available for work and want to do so. Most marginally attached workers are not searching due to being discouraged over job prospects or due to being in school.
U.S. employment history
During the 1940s, the U.S. Department of Labor, specifically the Bureau of Labor Statistics (BLS), began collecting employment information via monthly household surveys. Other data series are available back to 1912. The unemployment rate has varied from as low as 1% during World War I to as high as 25% during the Great Depression. More recently, it reached notable peaks of 10.8% in November 1982 and 14.7% in April 2020. Unemployment tends to rise during recessions and fall during expansions. From 1948 to 2015, unemployment averaged about 5.8%. There is always some unemployment, with persons changing jobs and new entrants to the labor force searching for jobs. This is referred to as frictional unemployment. For this reason, the Federal Reserve targets the natural rate of unemployment or NAIRU, which was around 5% in 2015. A rate of unemployment below this level would be consistent with rising inflation in theory, as a shortage of workers would bid wages (and thus prices) upward.
Jobs created by Presidential term
Job creation is reported monthly and receives significant media attention, as a proxy for the overall health of the economy. Comparing job creation by President involves determining which starting and ending month to use, as recent Presidents typically begin in January, the fourth month into the last fiscal year budgeted by their predecessor. Journalist Glenn Kessler of The Washington Post explained in 2020 that economists debate which month to use as the base for counting job creation, between either January of the first term (the month of inauguration) or February. The Washington Post uses the February jobs level as the starting point. For example, for President Obama, the computation takes the 145.815 million jobs of February 2017 and subtracts the 133.312 million jobs of February 2009 to arrive at a 12.503 million job creation figure. Using this method, the five Presidents with the most job gains (in millions) were: Bill Clinton 22.745; Ronald Reagan 16.322; Barack Obama 12.503; Lyndon B. Johnson 12.338; and Jimmy Carter 10.117. Four of the top five were Democrats.
The Calculated Risk blog also reported the number of private sector jobs created by Presidential term. Over 10 million jobs were created in each of President Clinton's two terms during the 1990s, by far the largest number among recent Presidents. President Reagan averaged over 7 million in each term during the 1980s, while George W. Bush had negative job creation in the 2000s. Each of these Presidents added net public sector (i.e., government) jobs, except President Obama.FRED-All Employees Total Nonfarm Payrolls-Retrieved July 24, 2018Washington Post-Trump hasn't made the U.S. economy better, but Brexit has made the U.K. economy worse-July 23, 2018
Writing in The New York Times, Steven Rattner compared job creation in the last 35 months under President Obama (2014-2016) with the first 35 months of President Trump (2017-2019, i.e., pre-coronavirus). President Obama added 227,000 jobs/month on average versus 191,000 jobs/month for Trump, nearly 20% more. The unemployment rate fell by 2 percentage points under Obama versus 1.2 points under Trump.
Coronavirus closures In March 2020, during the 2020 COVID-19 pandemic, American unemployment saw a huge increase; claims in one week rose to 3.3 million from 281,000 on the previous week. The previous record for unemployment claims in one week was only about one fifth as high, at 695,000 claims in 1982.
More than 38 million Americans lost their jobs and applied for government aid, including nearly 4 million people in California, in the eight weeks after the coronavirus pandemic began.
Recent employment trends
There are a variety of measures used to track the state of the U.S. labor market. Each provides insight into the factors affecting employment. The Bureau of Labor Statistics provides a "chartbook" displaying the major employment-related variables in the economy. Members of the Federal Reserve also give speeches and Congressional testimony that explain their views of the economy, including the labor market.