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How the Nation's Monthly Jobs Picture Comes Together

Wall Street Journal - Mar 9, 2012

The recent drop in the unemployment rate, combined with the presidential race's focus on the economy, has spurred fresh scrutiny of how the government collects labor-market data and who is counted as unemployed. The government's basic methods and definitions haven't changed much in decades but aren't always clear to non-economists. Here's an explanation of two key areas:

The government's definitions of "employment," "unemployment" and related concepts date back to the Great Depression, when policy makers decided they needed a way to measure the health of the labor market. Defining the concepts proved tricky. A person who is laid off from a job and is looking for a new one is clearly unemployed. But what about someone who decides to retire because he can't find a job? Or who says he wants a job, but isn't actually trying to find one? How do you account for people who are disabled and can't work? Or who have their hours cut back to part-time?

Ultimately, the government settled on a definition that looked at what people did, not what they said. In official statistics, the labor force is divided into two categories: the employed and the unemployed. The employed are people who work for pay, either part-time or full-time. The unemployed meet three criteria: They aren't working, they are available for work and they are making an active effort to find work. People who aren't in either category—including people who want to work but aren't actively looking for a job—aren't considered part of the labor force at all.

Read Full Article from Wall Street Journal

- Posted: 2012-03-09 15:51:19

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