Aimee Cernik, a member of the TALX Unemployment Product Management team, is our guest blogger today with some insight into how the national unemployment rate is calculated. 

Did you ever wonder how one arrives at a number that is responsible for determining the overall health trajectory of the economy?  In fact, every month a division of the United States Department of Labor called the Bureau of Labor Statistics (BLS) releases the previous month’s information on the position of the national unemployment rate.  Now, one may assume the BLS bases the national unemployment rate on the total number of unemployment claims filed across all the states, but there are many more factors to consider in calculating the rate such as those who are unemployed and have not filed for unemployment, those that are not eligible for benefits, and those whose benefits have already been exhausted.   And, this information is not available by exclusively looking at filed unemployment claims.

So if you cannot get the complete picture from filed unemployment claims- how does the BLS evaluate and determine the national unemployment rate? Since it is nearly impossible to account for the entire employed and unemployed population, the BLS conducts a sample study titled “Current Population Study” (CPS).  This CPS consists of 60,000 households (approx. 110, 000 individuals) that will participate in a structured interview, which is conducted by 2,200 trained interviewers…every month.

60,000 may not seem like a comparative number to the entire national population, but this sample is statistically sound and large enough to result in a representative and reliable estimate of the true unemployed population.  To ensure accuracy and remove any bias and sampling error the BLS has built in measures to keep the information clean, fresh and up to date. According to the BLS, “25% of the households in the sample are changed on a monthly basis for the specific purpose that no household in the sample will be interviewed more than four times consecutively. After a household is rotated out of the survey, it is not interviewed again for 8 months”.  The BLS has stated that the monthly estimate of unemployment from the sample is within 290,000 of the total census, and the any error resulting from sampling is not significant enough to alter the total and true unemployment rate.  

So who is actually included in the survey?  The BLS is selective of who can participate in the CPS, and has set criteria as to who is considered part of the United States labor force, which includes anyone of 16 years or older who is employed, or is actively seeking employment.  Those who are NOT included in the survey population are those under the age of 16, those that choose not to enter the labor market or not actively seeking employment, and those serving in the armed forces.  

Since the CPS is collecting data that is the foundation for the national unemployment rate, the information gathered must be done correctly, administered the same way-every time, to obtain the facts. Participants are never asked directly if they are unemployed, but rather are asked a series of questions to help conclude their status within the labor force. Moreover, the interviewers solely gather the information, and never determine a respondent’s employment classification. Rather the employment classification is determined by inputing the information into a computer program, and in turn, the program classifies the respondents as unemployed, employed, or simply not in the labor force. 

Certain questions are asked of those not in the labor force to obtain additional information as described by the BSL as , “their desire for work, the reasons why they had not looked for work in the last 4 weeks, their prior job search, and their availability for work.” Finally the interviews and the information collected are then compared to the number of people in the labor force, thus resulting in the national unemployment rate percentage.

Who knew there was so much work involved to produce such an important economic benchmark! To learn more about the CPS or the information provided by the BLS, please visit their website at: http://www.bls.gov/cps/cps_htgm.htm#why

Aimee Cernik