4.4: The Labor Force and the Unemployment Rate

The Household Survey or the Current Population Survey (CPS) plays an important role in providing statistics related to the U.S. labor market. The sampling frame for this survey is the civilian noninstitutional population aged 16 and older. The CPS gathers monthly data from approximately 60,000 households which is used to produce national estimates.

The CPS classifies individuals into three primary categories: employed, unemployed, and not in the labor force. From these classifications, several critical labor statistics such as the labor force, the unemployment rate, and the labor force participation rate.

The labor force is the sum of the employed and the unemployed.

The unemployment rate is calculated as the quotient of the unemployed people and the total labor force multiplied by 100.

The labor force participation rate is calculated as the quotient of the number of people in the labor force and the civilian noninstitutional population aged 16 and older, multiplied by 100.

These metrics are closely watched by economists and policymakers for insights into the health of the labor market.

Around the world, labor force statistics are typically collected through household surveys similar to the U.S. Current Population Survey (CPS). In India, for example, data is gathered through the Periodic Labour Force Survey (PLFS). Many countries, including Italy and Japan, collect labor market data from individuals aged 15 years and older.

Together, these surveys provide a standardized framework for measuring employment trends and enable cross-country comparisons of labor market conditions.

In the United States, the CPS, or the Household Survey, is conducted, and data is collected from the civilian noninstitutional population aged 16 and older through both in-person and telephone interviews.

Although the CPS collects responses from about 60,000 households, the sample is carefully designed to reflect the broader U.S. population.

The Bureau of Labor Statistics uses these survey responses to estimate national figures for individuals classified as employed, unemployed, or not in the labor force.

Then, statistics such as the labor force, the unemployment rate, and the labor force participation rate are calculated.

The labor force is the sum of the employed and the unemployed.

Next, the unemployment rate is calculated as the quotient of the unemployed people and the total labor force multiplied by 100.

Another statistic is the labor force participation rate, which is calculated as the quotient of the number of people in the labor force and the civilian noninstitutional population aged 16 and older, multiplied by 100.

Economists and policymakers closely monitor these statistics.