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Reader Luke Burnham from Concord, Massachusetts, asks:

I hear a lot of people talking about the unemployment rate - above 4% these days. But I also hear people saying that the number is artificially low because of people who have given up looking for work. I'm curious to know how the unemployment figure is determined.

The April unemployment rate stood at 4.2%, which is a historically low figure, but not everyone without a job ends up counted in this number. 

The headline unemployment rate is calculated by dividing the number of unemployed by the number of people in the labor force, and then multiplying that figure by 100 to come up with the percentage we see in each monthly jobs report. The Bureau of Labor Statistics conducts a monthly survey of about 60,000 households to determine how many people are unemployed. 

To be considered unemployed, you must have actively tried to find a job within the last four weeks and be available for work. The labor force consists of all employed and unemployed people who are 16 or older, according to the BLS. 

“The official unemployment rate is one that's based on an internationally agreed upon definition that a lot of thought went into,” said Katharine Abraham, an economics professor at the University of Maryland. 

The Bureau of Labor Statistics isn’t miscalculating the unemployment rate or trying to mislead the public about the number of people who are actually unemployed. The agency is rigorous in its calculations and transparent about how it makes those calculations, economists told Marketplace.  

It’s just that the headline unemployment rate is based on specific parameters that will inevitably leave out some workers or fail to measure how truly satisfied they are with their jobs. Both part-time and temp workers are counted as employed.  But if you can’t find the job you want or find a full-time job, you might feel like there’s a disconnect between how you’re feeling and the positive employment numbers you’re seeing. 

The BLS is aware that a single figure can’t tell the whole story about our job market, which is why it measures the rate of hiring and firing in the country and produces other unemployment rates that account for different types of workers. 

Both hiring and layoff rates are low right now, which tells us there isn’t that much “healthy churn” in the labor market, said Daniel Zhao, the lead economist at Glassdoor. 

“Just like a pond needs flowing water in order to prevent it from becoming stagnant, the labor market needs a certain amount of healthy churn as well. And so this sluggish hiring environment we're seeing right now means that many workers feel stuck in their careers,” Zhao said. “It also means it's hard for entry-level workers or workers who are reentering the labor force to get back onto the career ladder.” 

On the hiring side, employers are concerned the economy may slow down, which makes it harder for them to commit to hiring new employees, Zhao said. President Donald Trump’s tariff policies have adversely affected businesses, which are now halting any plans to expand. 

And on the layoff side, employers still feel “burned” by the labor shortages they experienced during the pandemic and are now hesitant to lay off employees if they don’t have to, Zhao said. 

Employers 10 to 20 years ago were more willing to lay off workers with the understanding that they’d be able to easily hire people again after an economic downturn, Zhao added. 

The BLS has also come up with a total six unemployment rates, labeled U-1 through U-6, to give us a better understanding of the job market. 

The U-3 rate is the headline figure the public is most familiar with. U-1 captures those who have been unemployed 15 weeks or longer, and U-2 includes those who have been laid off or completed their temp job. 

But even though these different unemployment rates include different types of workers, they tend to go up and down together, so they are basically telling economists the same story, Abraham said.

The question economists are really asking when they look at unemployment data is: “Are things getting better or are things getting worse?” Abraham said. 

Abraham said she thinks the U-3 rate is a “pretty sound concept.” You wouldn’t want to include someone as unemployed if they’re not available for work and they don’t want to work, because even if a job opened up, they wouldn’t take it, Abraham explained. 

The BLS counts someone as unemployed if they’re jobless and have actively looked for a job in the past four weeks, but not someone who stopped sending in job applications five weeks ago. While that leaves out some more selective job seekers, trying to fix this issue would become burdensome, said Patrick Scott, an associate professor of economics at Louisiana Tech University. 

“Well, then now, what is the arbitrary cutoff for having looked for a job? I don't know what that really should be,” Scott said. “We create these numbers, these arbitrary cut offs so to speak, in order to make measurement easier.”

The unemployment rate isn’t perfect. No data point is, Zhao said. 

But the BLS provides economists and the public with a trove of statistics to help them become as informed as possible. 

“The BLS does a great job in presenting many different statistics and being very transparent about how they collect data, how they calculate these measures, and when they do make changes,” Zhao said. “So I just want to give them a little bit of a shout out for all the data that we get to talk about.”