The Labor Market in Depth
How the US labor market is measured and read: who counts as employed, unemployed, or out of the labor force, the broader U-6 measure, participation and age, job openings, hires, quits, and layoffs, labor market tightness and wages, and weekly jobless claims.
The short version
The unemployment rate counts people without a job who are available and have looked for work in the past four weeks, as a share of the labor force. People who stop looking drop out of the count, so it pays to check participation and the broader U-6 rate, which was 7.6% in September 2026 against 4.2% for the headline. Participation for all adults moves with the population's age, so the prime-age rate for 25 to 54 year olds is a cleaner guide. Job openings, hires, and quits show how the market is moving: in 2022 there were two openings per unemployed person, and by 2026 about one. Weekly jobless claims are the fastest signal.
By the end of this lesson, you'll be able to
- Define employment, unemployment, the labor force, and participation, and compute the main rates
- Explain what the headline unemployment rate misses and how U-6 and prime-age measures fill the gap
- Read job openings, quits, and weekly claims as signs of labor market tightness
Why this matters
Pay, including benefits, is about 60% of personal income in the US,1 and household spending is about two thirds of GDP, as GDP and How It Is Measured showed. The labor market also sits inside the Federal Reserve's mandate, which pairs maximum employment with price stability.2 When the jobs data change, interest rates, consumer spending, and company wage bills change with them. The headline figure is the place to start, and this lesson covers what sits behind it.
Who counts as what
The household survey sorts every person aged 16 and over, outside the military and institutions such as prisons, into one of three groups:3
- Employed: did any work at all for pay or profit in the survey week, or had a job they were temporarily away from, for example on vacation or sick.
- Unemployed: had no job, were available for work, and actively looked for work in the prior four weeks. People on temporary layoff who expect to be recalled also count.
- Not in the labor force: everyone else, including retirees, full-time students, and people caring for family who aren't looking for work.
The Labor force. Everyone who is either employed or unemployed, meaning without a job but available and actively looking. People who aren't looking, such as retirees and full-time students, are outside it. Glossary is the employed plus the unemployed. Three rates follow from these groups.
| Measure | Calculation | Result |
|---|---|---|
| Employed | 592 | |
| Unemployed | 26 | |
| Labor force | 592 + 26 | 618 |
| Unemployment rate | 26 ÷ 618 | 4.2% |
| Participation rate | 618 ÷ 1,000 | 61.8% |
| Employment-population ratio | 592 ÷ 1,000 | 59.2% |
The US figures for September 2026 were 4.2%, 61.8%, and 59.2%.45 The unemployment rate is a share of the labor force. The other two are shares of the whole adult population.
What the headline rate misses
Someone who wants a job but has stopped looking isn't counted as unemployed. They're outside the labor force, and BLS calls them marginally attached; those who stopped because they believe no job is available to them are discouraged workers.3 If enough people give up, the unemployment rate can fall even though nobody found work.
BLS publishes broader measures for this reason. The widest, U-6. The broadest US unemployment measure. It adds to the unemployed those who want work but have stopped looking recently and those working part time who want full-time work. Glossary, adds the marginally attached and people working part time who want full-time work but can't find it.6
| Month | Unemployment rate | U-6 |
|---|---|---|
| April 2020 | 14.8% | 22.9% |
| April 2023 | 3.4% | 6.6% |
| September 2026 | 4.2% | 7.6% |
Bureau of Labor Statistics figures.6 April 2020 was the worst month of the pandemic for both. April 2023 was the lowest headline rate since 1969.7
Participation and age
The participation rate covers everyone 16 and over, retirees included, so it moves with the population's age mix as well as with the job market. Economists often look at people aged 25 to 54, called prime age, to avoid that.
| Measure | Record high | February 2020 | September 2026 |
|---|---|---|---|
| Participation, 16 and over | 67.3% (early 2000) | 63.3% | 61.8% |
| Participation, 25 to 54 | 84.6% (January 1999) | 82.9% | 83.7% |
| Employment-population ratio, 25 to 54 | 81.9% (April 2000) | 80.4% | 80.7% |
Bureau of Labor Statistics figures.5 The overall rate is well below its peak, while the prime-age rates are close to theirs and above where they stood before the pandemic. Read together, they suggest the fall in overall participation has more to do with the population's age than with working-age adults leaving work.
The rest of this lesson is for members
Still to come in this lesson: Flows: openings, hires, quits, and layoffs, Weekly jobless claims, the key takeaways, and 2 quiz questions with explanations.
Membership opens every lesson in the curriculum, the capstone projects, the interactive tools, and the members-only channels in the Hyperion Entities Discord. The first lesson of every module stays free.
Go deeper
- Reading Economic Data ReleasesEconomics for Investors (depth track)
- What Drives InflationEconomics for Investors (depth track)
- Business Cycles and RecessionsPart 6: Strategy, Behavior, Accounts, and Taxes
- GDP and How It Is MeasuredEconomics for Investors (depth track)
Notes and sources
- Federal Reserve Bank of St. Louis (FRED), from the U.S. Bureau of Economic Analysis. Compensation of Employees, Received (W209RC1) and Personal Income (PI), monthly at annual rates. Checked 2026-10-14. Back to text
- Board of Governors of the Federal Reserve System. Why does the Federal Reserve aim for inflation of 2 percent over the longer run?. Checked 2026-10-14. Back to text
- U.S. Bureau of Labor Statistics. How the Government Measures Unemployment. Checked 2026-10-14. Back to text
- U.S. Bureau of Labor Statistics. The Employment Situation, September 2026 (released October 2, 2026). Checked 2026-10-14. Back to text
- Federal Reserve Bank of St. Louis (FRED), from the U.S. Bureau of Labor Statistics. Labor Force Participation Rate (CIVPART), Employment-Population Ratio (EMRATIO), and the same for ages 25 to 54 (LNS11300060, LNS12300060), monthly. Checked 2026-10-14. Back to text
- Federal Reserve Bank of St. Louis (FRED), from the U.S. Bureau of Labor Statistics. Total Unemployed, Plus All Persons Marginally Attached to the Labor Force, Plus Total Employed Part Time for Economic Reasons (U-6) (U6RATE), and Unemployment Rate (UNRATE), monthly. Checked 2026-10-14. Back to text
- Federal Reserve Bank of St. Louis (FRED), from the U.S. Bureau of Labor Statistics. Unemployment Rate (UNRATE), monthly. Checked 2026-10-14. Back to text
- U.S. Bureau of Labor Statistics. Job Openings and Labor Turnover Survey: Overview. Checked 2026-10-14.
- U.S. Bureau of Labor Statistics. Job Openings and Labor Turnover Survey: Data Definitions. Checked 2026-10-14.
- Federal Reserve Bank of St. Louis (FRED), from the U.S. Bureau of Labor Statistics. Job Openings (JTSJOL), Hires rate (JTSHIR), Quits rate (JTSQUR), and Layoffs and Discharges rate (JTSLDR), Total Nonfarm, monthly. Checked 2026-10-14.
- Federal Reserve Bank of St. Louis (FRED), from the U.S. Bureau of Labor Statistics. Unemployment Level (UNEMPLOY), monthly. Checked 2026-10-14.
- National Bureau of Economic Research. Ben S. Bernanke and Olivier J. Blanchard, What Caused the U.S. Pandemic-Era Inflation?, Working Paper 31417 (June 2023). Checked 2026-10-14.
- Federal Reserve Bank of St. Louis (FRED), from the U.S. Bureau of Labor Statistics. Average Hourly Earnings of All Employees, Total Private (CES0500000003), monthly. Checked 2026-10-14.
- Federal Reserve Bank of St. Louis (FRED), from the U.S. Employment and Training Administration. Initial Claims (ICSA), weekly, seasonally adjusted. Checked 2026-10-14.