Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.
The U.S. unemployment rate slipped in January, despite a series of aggressive moves by the Federal Reserve to cool the economy and tamp down inflation with higher interest rates. The government’s latest report showed the jobless rate dropped to 3.4% from 3.5% the previous month.
U.S. Unemployment Rate
The unemployment rate for January was 0.6 of a percentage point lower than at the same time last year.
The U.S. added an estimated 517,000 jobs in the latest month.
Unemployment Rates by State
States With the Highest Unemployment Rates
At the state level, Nevada had the highest unemployment rate for December—the latest month with available data—at 5.2%. Other high jobless rates were found in Illinois (4.7%) and the District of Columbia (4.7%).
States With the Lowest Unemployment Rates
The latest report showed the state with the lowest unemployment was Utah, with a jobless rate of 2.2%. North Dakota was also among the states with the strongest job market, according to the latest data, with an unemployment rate of just 2.3%. South Dakota, with a jobless rate of 2.3%, was the third lowest in January.
Different Measures of Unemployment
The unemployment rate gives a big-picture measure of the labor market. But, there are other measures that offer a more detailed jobs picture.
For example, the Bureau of Labor Statistics (BLS) measures how many people have been unemployed for 15 weeks or longer. In January, the share of the workforce in that category dropped to 1.2% from 1.6% a year earlier. This is just one of many statistics it pulls from the survey.
Other measures include discouraged workers, which are people who want to work but haven’t been able to find a job in the past 12 months. Discouraged workers aren’t counted as unemployed because they haven’t looked for a job in the previous four weeks.
Methodology
The unemployment rate is based on data collected from the Current Population Survey (CPS), also known as the household survey. The BLS surveys about 60,000 households, or about 110,000 people, monthly through in-person and phone interviews. To get the most accurate estimate on both the national and state level, all of the counties and independent cities in the U.S. are grouped geographically, considering both rural and urban areas of each state and Washington D.C., to best represent the unemployment rate in each state.
What Is the Unemployment Rate?
The unemployment rate measures how many people over the age of 16 are currently unemployed but are actively looking for work. People are no longer counted in the unemployment rate after four weeks of not seeking work. Unemployment data is gathered each month by the Census Bureau and the Bureau of Labor Statistics. The unemployment rate for the month of January was 3.4%.
How Are Unemployment Rates Determined?
The unemployment rate is a percentage of the labor force that includes both employed and unemployed people over the age of 16. To be counted as part of the labor force, you must have actively looked for a job within the last four weeks.
Using survey data from the Current Population Survey (CPS), also known as the household survey, the BLS calculates the unemployment rate by dividing the number of unemployed people by the total number of people in the labor force, then multiplying by 100 (unemployed ÷ labor force x 100).
How Does a High Unemployment Rate Affect the Economy?
High unemployment rates can have several negative effects on the economy, including an increased need for public assistance, a drop in consumer spending, and decreased productivity, leading to lower incomes.
If the unemployment rate rises, it can have a snowball effect. As people lose their jobs, they spend less, so the demand for goods and services decreases; if this pattern persists, it can cause enormous damage to the economy.
An extreme example of how a high unemployment rate damages the economy was seen during the Great Depression, when the unemployment rate was estimated to have hit nearly 25%.
Frequently Asked Questions (FAQs)
Why do state unemployment rates vary so immensely?
The unemployment rate can vary among states for many reasons. It can be influenced by the types of industries prevalent in each state and how in-demand those industries are. For instance, states with large tourist and hospitality industries, such as California, saw their unemployment rates spike during Covid-19 lockdowns.
What is a healthy unemployment rate?
Unemployment is considered to be at a level that’s healthy for the economy when it’s in the 4% range. Generally, a low unemployment rate is good for the economy. But when unemployment dips too low, it can have negative consequences such as high inflation.
