Unemployment and its Measurement

The basic definition of unemployment is the percentage of the labor force who are actively seeking work but cannot find a job. To belong to the labor force you simply have to be at least 16 years and either have a job or available to work. A common misconception about unemployment is that anyone who does not have a job is considered unemployed. This is not true. A stay at home parent or someone who is retired is not unemployed. You must be jobless and actively seeking a job to be considered unemployed.

When you read about unemployment in the newspaper there are two different rates they use. The first is the official unemployment rate released by The Federal Reserve, which is called the U3. It’s pretty simple, it’s just the number of people looking for jobs divided by the amount of people in the labor force. When looking to cause a media stir the U4 or the U6 is often reported. The U4 includes everyone looking for work in the labor force and all the people who have given up looking for work, and the U6 rate includes part-time workers who desire but cannot find full-time jobs.

Unfortunately in these difficult economic times the amount of discouraged workers (people who have given up on finding a job) has increased dramatically. Previously a media scare tactic, the growing U4 and U6 rates are now a legitimate economic concern.

The current U3 unemployment rate in the state of Connecticut is 8.2% which is less than the national average of 9.5%. Within Connecticut however, some cities and towns are experiencing staggering levels of unemployment. The area with the highest level of unemployment is the Waterbury area with an average unemployment rate of 10.8%, and the area with the lowest average unemployment is Danbury, which is currently experiencing an average of 7.1% unemployment.

The city of Hartford has the highest level of unemployment in the state with 14.1% employment that does not bode well for a city and economy that was already struggling before the recession began. Although the Waterbury LMA had the highest unemployment in the state, the Hartford LMA has the most cities and towns with double digit unemployment, including New Britain (12%), East Hartford (10.6%), and Thomaston (10.4%). Bridgeport and Waterbury also experienced extremely high levels of unemployment in the month of August with 11.9% and 13.1% unemployment respectively.

Nearby, New York State is experiencing a similar unemployment rate with 8.9%, and New Jersey has a current unemployment rate of 9.7%.. That means that throughout the entire state of New Jersey nearly one in ten people are seeking a job and cannot find one. The government sets an unemployment rate of 3% as a goal for itself and a sign that the economy is healthy. If the economic recession is to end, and economic growth to continue, then unemployment must start regressing to its ideal rate.