The unemployment rate is one of the most widely-watched indicators of economic health. It is a key piece of information when thinking about how well an economy is performing and what needs to be done in order to get it back on track after a recession.

The official unemployment rate is calculated by counting people who are out of work and actively looking for jobs as a percentage of the population in the labor force. This definition can miss some people who would like to work but cannot find jobs, such as discouraged workers who have given up looking for work. This hidden unemployment may cause the unemployment rate to underestimate the true state of the labor market.

There are a number of ways to reduce unemployment. One way is to implement an expansionary monetary policy, which decreases interest rates and makes it cheaper for businesses to borrow money. This can increase demand for goods and services, causing businesses to hire more employees to meet this demand.

Another way to reduce unemployment is to provide more assistance for people who are out of work, such as by granting companies tax credits or incentives to hire more workers or by providing benefits that allow unemployed workers to purchase basic necessities like food and shelter. Finally, it can help to create jobs by constructing things like public transportation or infrastructure projects that will employ people in the construction industry.

Unfortunately, unemployment tends to be a vicious cycle. High unemployment has a negative impact on the economy in many ways, including by reducing consumer spending and driving up the cost of living for those who are still employed. This in turn leads to more layoffs, and the cycle continues unless it is broken by outside forces like government intervention.