Economics is an entire field of study for a reason—it can be really complicated. Without some training, wrapping your head around even microeconomics—like your own household budget—is a tough task.
So when you read news items that boast of a low unemployment rate, it can sound encouraging. But even something as apparently cut-and-dried as the rate of unemployed people is more complicated than it seems. Here are three important facts you should know about today’s job market.
1. The unemployment rate can be misleading.
Many people think the unemployment rate is simply a percentage of Americans that don’t have jobs. In reality, unemployment depends on a variety of factors.
Generally, the unemployment rate isn’t a measure of how well the economy is faring or who has jobs in relation to their field of specialization. For example, while active members of the military are working, they’re not included in the total number of Americans who are employed or unemployed. The data doesn’t account for those under age 16, either, or those who are hospitalized or housed in an institution.
In addition, part-time workers, whether by choice or because they had their hours cut, aren’t considered unemployed. Neither are people who are under-employed or “discouraged” (meaning they don’t have the job they want but are technically working). Temp workers or those who don’t work by choice are also not considered unemployed. Students, retirees, the disabled, and family caretakers are not part of the workforce and not counted in unemployment numbers as well.
2. The unemployment rate is a “lagging indicator” of the economy.
A lagging indicator is one that doesn’t measure economic health at the time of its publication. Generally, the unemployment rate takes several months to catch up to other economic indicators. The reason for this is that hiring managers want to see upticks in the economy stabilize before they commit to hiring people for existing positions.
So while the unemployment rate doesn’t seem to fall much in a down economy, don’t get too excited: the drop is coming. And if the unemployment rate seems to stagnate at a high rate in a rebounding economy, have hope: the numbers will catch up soon enough.
3. There are different kinds of unemployment.
People tend to think that unemployment stems from a lack of jobs. In its simplest form, that could very well be the case. However, there are types of unemployment that show just how complicated the unemployment rate can be:
- Frictional unemployment occurs when there are jobs and workers both available, but they don’t match up for some reason. Usually this is logistical; the workers are in the wrong geographical area or each is mutually unaware of the other.
- Structural unemployment occurs when there is a dearth of jobs for the kinds of skills available workers have. This happens a lot when industrial automation occurs.
- Cyclical unemployment refers to a slowdown in the economy that requires fewer qualified workers, or the budget cannot support as many workers of a certain skill set as before.
Our recent economic recession seems to have been the result of all three forms of unemployment.
Stay Ahead of the Curve
This knowledge of the unemployment rate and the state of our job market should help open your eyes a little about your chances of becoming gainfully employed. You can use other tools, like LifeCareer’s job finder and jobs news , to stay abreast of current and coming trends in the job market. Economies are always in flux, so it’s a good idea to stay ahead of the game wherever you can.