Unemployment

Measuring unemployment in the United States is one of the core concepts in the CPS. For that reason, a fair amount of the survey is devoted to questions about whether or not an individual is employed and whether, if they are not employed, it is because they left the labor force or because they are looking for work.

What is the definition of unemployment?
Unemployment has a very specific definition—it does not just mean anyone without a job. To be considered unemployed, an individual must 1) not currently have employment and 2) actively look for work. An individual who only meets the first condition is considered not in the labor force and is counted separately.

How to calculate unemployment
While questions about unemployment make up a decent portion of the survey, the variable PEMLR contains headline information about the three major labor force statuses.

PEMLR – Monthly Labor Force Recode
1 Employed – At work
2 Employed – Absent
3 Unemployed – On Layoff
4 Unemployed – Looking
5 Not in the Labor Force – Retired
6 Not in the Labor Force – Disabled
7 Not in the Labor Force – Other

Calculating unemployment for a given month amounts to tallying those individuals who belong to categories 3 and 4 of PEMLR. The unemployment rate, then, is that number over the sum of all individuals in categories 1 through 4, or the total labor force.

Other Unemployment Rates
The standard unemployment rate (the ratio of unemployed over the sum of the employed and unemployed, or labor force) is also referred to as U-3. In fact, the BLS reports a total of six alternative measures of labor underutilization each month.

U-1 Persons unemployed 15 weeks or longer as a percent of the civilian labor force
U-2 Job losers and persons who completed temporary jobs as a percent of the civilian labor force
U-3 Total unemployed as a percent of the civilian labor force (official unemployment rate)
U-4 Total unemployed plus discouraged workers as a percent of the civilian labor force and discouraged workers
U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force as a percent of the civilian labor force, plus all persons marginally attached to the labor force
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons as a percent of the civilian labor force plus all persons marginally attached to the labor force