Unemployment Rate

The unemployment rate is the share of people willing and able to work who cannot find a job. It is calculated against the labour force, not the total population.

What it excludes matters. People who have given up looking drop out of the labour force entirely and stop counting as unemployed — which is how the rate can look lower when conditions are severe.

That is why the employment rate is read alongside it. Measuring the share of the whole population actually working captures discouraged workers too, and the two together show the real state of the labour market.

Central banks read unemployment together with prices. Very low unemployment lifts wages and pushes prices up, which is how strong jobs data can send equity markets down.

Unemployment is a lagging indicator. Firms do not fire immediately when conditions worsen, nor hire immediately when they improve. It describes the present rather than forecasting what comes next.