The unemployment rate is the most commonly publicized indicator of the country's economic condition. We begin with the civilian noninstitutional adult population in the United States, which includes all people 16 and older, except those in jail, mental institutions, or nursing homes.

The term civilian indicates that people in the military are not included in the definition. References to the adult population in this section relate to the civilian noninstitutional adult population. The labor force is made up of adult citizens who are either working or searching for jobs. Those who desire a job but can't find one are classified as jobless.

• The term unemployment rate refers to the percentage of people in the labor force who are out of work.

As a result, the monthly unemployment rate equals the number of unemployed—that is, individuals without jobs who are searching for work—divided by the number of persons in the labor force.

Only a small percentage of individuals who are not working are classified as jobless. Others may have retired, be students, have children at home, or just may not want to work. Others may be unable to work due to a chronic disease or disability.

Some may have gotten so frustrated by a protracted, fruitless job hunt that they have given up.

These disgruntled workers have effectively fallen out of the labor field and are therefore not listed as jobless. Finally, whereas approximately one-third of people working part-time would prefer to work full-time, all part-timers are listed as employed. Because the official unemployment rate excludes discouraged employees and includes all part-time workers as employed, it may underestimate the real amount of the economy's unemployment. Later, we will look at some of the reasons why the unemployment rate may overstate the real level of unemployment.

Exhibit 1 depicts these criteria, with circles representing the various groupings and the quantity (in millions) of persons in each category and subcategory.

The unemployment rate is found by dividing the number of unemployed by the number in the labor force. In April 2010, 15.3 million people were unemployed in a labor force of 154.7 million, yielding an unemployment rate of 9.9 percent.

The productive capacity of any economy is influenced by the proportion of adults in the labor force, which is measured as the labor force participation rate. Exhibit 1 shows that the adult population in the United States consists of those in the workforce (154.7 million) plus those who are not in the labor force (82.6 million), for a total of 237.3 million individuals.

• The term discouraged workers refer to those who drop out of the labor force in frustration because they can’t find work

The labor force participation rate is thus equal to the labor force participation rate divided by the adult population, or 65 percent (154.7 million/237.3 million). As a result, almost two out of every three individuals are employed. The labor-force participation rate rose from 60% in 1970 to 67.5% in 1990 and has been largely stable since then.