Limitations of the Unemployment Rate MeasurementThe unemployment rate is not a perfect indicator of employment in the economy. The following are some reasons:
Discouraged workers and ones collecting unemployment benefits without seeking a job make it difficult to distinguish between those who are unemployed and those who are not in the labor force. These effects work in mixed directions; unemployment may be overstated or understated by the unemployment rate. As long as any bias in the unemployment rate is relatively constant over time, then the rate is still useful for measuring changes in the economy from one period to the next. Other indicators such as the number of discouraged workers and part-time labor statistics all can supplement the unemployment rate data to provide additional insight.
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