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The U.S. labor market continued to expand in 2023. Although there was an uptick in unemployment in the second half of the year, the national unemployment rate remained below 4 percent throughout 2023. The labor force participation rate, at 62.6 percent in the fourth quarter, increased over the year. Notable labor market improvements occurred among people of prime working age (those ages 25 to 54); these improvements were most pronounced among women.

This article discusses the definition and causes of unemployment, national unemployment rates since 1929, and workers who typically experience the highest incidence of job loss.

Conventional unemployment rate measures tend to overestimate the degree of labor underutilization if unemployment disproportionately affects less educated and generally less productive workers. Based on index number theory as well as on econometric techniques, this article proposes a number of alternative measures that are exact for specific labor aggregator functions. The results for the United States show that the conventional, unweighted unemployment rate overestimates the true rate by about 0.6 of a percentage point, or by almost 14%.

Critics of legislation requiring employers to provide paid sick days frequently argue that these measures will lead to job loss and raise the national unemployment rate. However, this issue brief shows that the experience of 22 countries with the highest level of social and economic development (as measured by the Human Development Index) suggests that there is no statistically significant relationship between national unemployment rates and legally-mandated access to paid sick days and leave.