The Current Population Survey (CPS) conducted by the U.S. Bureau of Labor Statistics (BLS) is a key source of data on U.S.unemployment. The national unemployment rate is derived from this survey and is the number most commonly touted by the media to summarize the state of the economy and its workers.

But it doesn't tell the whole story. (Think you're about to get the ax? Read Planning For Unemployment for tips on how to cope.)
What It Says
According to the BLS website, the CPS counts the following people as employed:

  • All persons who worked for pay or profit during the survey reference week.
  • All persons who did at least 15 hours of unpaid work in a family-owned enterprise operated by someone in their household.
  • All persons who were temporarily absent from their regular jobs, whether they were paid or not (this includes persons who were on vacation, ill, experiencing child-care problems, dealing with family or personal obligations, on maternity or paternity leave, involved in an industrial dispute, or prevented from working because of bad weather).

What It Doesn't Say
Clearly, the CPS is an important measure, but it can't tell us everything about the state of unemployment in the U.S. So, what's missing?

1. Whether workers have full-time hours.
The CPS counts people as employed if they are working at part-time or temporary jobs, regardless of the number of hours worked or whether this employment represents a sufficient or ideal employment situation for that worker. If a laid-off consultant works 10 hours at McDonald's, he would be counted as employed, but this employment is probably neither sufficient to pay his bills, nor ideal for him or society as a whole given that he is qualified to do more challenging, more productive and higher-paying work. (For more tips on how to survive a layoff, read Laid Off? You Can Still Retire and Losing Your Job: From A To Z.)

2. Whether workers are "underemployed".
The consultant working at McDonald's gives us an example of something else that is not measured by the unemployment rate: underemployment, or working at a job that requires fewer skills and offers lower pay than the best jobs for which a worker is qualified. Our consultant would also be considered an involuntary part-time worker - yet another factor the unemployment rate does not consider.

3. Whether a worker has given up looking for a job, even though he or she needs one.
The BLS only counts as unemployed those who "do not have a job, have actively looked for work in the prior four weeks, and are currently available for work." If you have a cold (known as a "temporary illness"), you are still considered available for work by the survey. However, if the state of the economy is so bad that you become depressed about losing your job, or your recent attempts at job searching have been so futile that you haven't even tried to get a new job in the last four weeks, you are no longer considered unemployed: you become "marginally attached" to the workforce or a "discouraged worker" and are no longer counted in the unemployment rate. Other people not considered part of the labor force include prisoners, people confined to nursing homes, members of the Armed Forces on active duty, homemakers, students and retired persons.

4. What the unemployment numbers mean in context.
Another problem with the unemployment rate is that it cannot be used to accurately compare unemployment levels from different years. According to a report by economists John Schmitt and Dean Baker of the Center for Economic and Policy Research, it is difficult to accurately compare, for example, the unemployment rate in 1982 versus the unemployment rate in 2009 because of changes in the age makeup of the population. A younger population, they state, will result in a higher unemployment rate because "the young change jobs more frequently and are more likely to move in and out of the labor force." Further, government methods of measuring the unemployment rate may change over time, as they did in 1994 when the BLS overhauled the CPS, changing its questionnaire and some of its labor-force concepts.

These are just a few of the problems with relying too heavily on the national unemployment rate as a meaningful indicator of the state of the economy and its workforce. Unfortunately, this often means that the true percentage of people who don't have jobs or aren't making enough money is often worse than the official unemployment rate suggests.

Related Articles
  1. Economics

    The True Unemployment Rate: U6 Vs. U3

    Learn how to distinguish between the U-3 and U-6 unemployment rates, and explore which rate provides a truer picture of unemployment.
  2. Economics

    Is the U.S. Economy Ready for Liftoff?

    The Fed continues to delay normalizing rates, citing inflation concerns and “global economic and financial developments” in explaining its rationale.
  3. Investing News

    Wednesday Intel: Jobs, Manufacturing and Oil

    Today's economic data relates to employment levels, industrial production and crude oil.
  4. Mutual Funds & ETFs

    Using Short ETFs to Battle a Down Market

    Instead of selling your stocks to get gains, consider a short selling strategy, specifically one that uses short ETFs that help manage the risk.
  5. Markets

    Is Another Bear Market Ahead?

    With market volatility recently reaching its highest level, investors are questioning what the outlook is for U.S. stocks in 2015 and beyond.
  6. Home & Auto

    How Much Money Do You Need to Live in NYC?

    Learn how much money you need to meet basic expenses in New York City as a student, as a professional and as an unemployed job seeker.
  7. Entrepreneurship

    5 Signs You’re About To Be Fired

    Often the signs of an imminent firing are subtle. Keep these five in mind.
  8. Investing

    Did the Fed Miss its Window to Raise Rates?

    The debate in the media over whether the Federal Reserve will announce liftoff this month or in December continues to rage on.
  9. Professionals

    How to Know When to Pass on an Investment

    Knowing what to invest in is important, but knowing what not to invest in is equally important. Here's how to decide when to walk away.
  10. Professionals

    Do Bear Market Funds Make Sense for Investors?

    Bear market funds have their place. But are they right for individual investors?
  1. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  2. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at, and Determining ... Read Full Answer >>
  3. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  4. How does the risk of investing in the industrial sector compare to the broader market?

    There is increased risk when investing in the industrial sector compared to the broader market due to high debt loads and ... Read Full Answer >>
  5. How can I hedge my portfolio to protect from a decline in the food and beverage sector?

    The food and beverage sector exhibits greater volatility than the broader market and tends to suffer larger-than-average ... Read Full Answer >>
  6. How attractive is the food and beverage sector for a growth investor?

    The food and beverage sector is attractive for a growth investor. The sector's high degree of volatility means it tends to ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  2. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  3. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  4. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Capitalized Cost

    An expense that is added to the cost basis of a fixed asset on a company's balance sheet. Capitalized Costs are incurred ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!