Alison
By Allison Linn Senior writer
msnbc.com
updated 4/3/2009 10:46:31 AM ET 2009-04-03T14:46:31

The government reported Friday that the unemployment rate soared to 8.5 percent in March, the highest since late 1983, as employers handed pink slips out to 663,000 workers.

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But how does the government know how many people are out of work, or working less than they would like? Here’s what you should know about how the unemployment rate and other data are calculated.

How does the Bureau of Labor Statistics determine the unemployment rate?

The unemployment rate and related data are calculated based on a monthly survey of about 60,000 U.S. households. The survey asks a series of questions to determine whether household residents who are 16 years old or older are employed, unemployed or not in the labor force.

The basic unemployment rate is based on the number of people who say they are currently unemployed but are actively looking for work. The survey also is used to fill in the blanks on other elements of the U.S. employment picture. This includes discouraged workers — people who are unemployed and no longer seeking work because they don’t think they will find a job — and people who are working part time but would like to be working full time.

The unemployment rate is not based on how many people are collecting unemployment benefits and it does include people who are formerly self-employed. Also, the household survey does not specifically seek to determine whether people are working here legally.

How does the government determine how many people are in the labor force?

Each month, the Bureau of Labor Statistics also gathers data based on payroll records of about 160,000 U.S. businesses, ranging from tiny independent firms to large corporations. It uses that information to calculate how many jobs have been gained or lost over the month, both overall and in specific industries such as construction, manufacturing or healthcare.

What about the statistics on unemployment benefits?

Separately, the government also collects weekly data from the states on how many people are collecting unemployment benefits. It uses that to calculate the both the overall number of people receiving jobless benefits and the number of people filing new claims for unemployment benefits.

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