The unemployment report for September will be released Friday, October 3rd.  Since September of 2012, the rate has gradually dropped from 7.8 percent to 6.1 percent last August. The unemployment rate is a percentage of people 15 years old and over who are out of work and actively looking. The unemployment rateDepartment of Labor calculates this rate based upon surveys taken from a preselected pool of American citizens.

The Department divides the number of unemployed people by the total work force. This pool changes throughout the year and consists of 160,000 individuals.

There are different unemployment rates calculated, and they are:

  • U1- Rate of those unemployed 15 weeks or more
  • U2- Rate of labor force who lost work or finished part time work
  • U3- This is the “official” rate, those out of work actively looking
  • U4- This is U3 plus workers who identify themselves as “discouraged” and stopped looking
  • U5- U4 plus those who are able to work, not seriously looking but not given up
  • U6- U5 plus part time workers who want to work full time but can’t find any work

What has helped reduce the unemployment rate is the exodus of workers from the work force entirely. Those that have quit looking and don’t intend to. These individuals are taken out of the total labor force used to calculate the unemployment rate. The fewer workers, the lower the rate.

This labor participation rate at last count is 62.8 percent. That matches the same rate reached in March of 1978. Since the recession that started in late 2007, there are 6.9 million fewer Americans working or trying to find work. Much of the decline is due to people reaching retirement age and collecting social security or a pension and it can also indicate more people are going back to school to be retrained or get a degree.

While economists, traders and the Fed will watch the unemployment rate, attention should also be paid at the available work force. A falling rate doesn’t always mean an economy on the mend.