Three ratios from one survey
Every month the Current Population Survey sorts the civilian population aged 16 and over into three groups. People in institutions such as prisons and nursing homes, and people on active military duty, are left out of the count. The employed did any work for pay or profit in the survey week, worked at least 15 hours unpaid in a family business, or had a job they were temporarily away from. The unemployed had no job, were available to work and had actively looked for one in the previous four weeks, or were waiting to be recalled from a temporary layoff.
Everyone else is not in the labor force: retirees, full-time students, people caring for family, and people who want a job but have stopped looking. The labor force is the employed and the unemployed added together. The three headline ratios divide by different things: the unemployment rate divides by the labor force, while the participation rate and the employment–population ratio divide by the whole population.
Stopping the search lowers the rate
Take a population of 200 people: 120 employed and 8 unemployed. The labor force is 128, so the unemployment rate is 8 ÷ 128 = 6.25%, participation is 64% and the employment–population ratio is 60%.
Now 2 of the unemployed give up looking because they believe no job is available. Nothing else changes: no one is hired and no one is laid off. The 2 are no longer unemployed; they are outside the labor force. The unemployment rate falls to 6 ÷ 126 = 4.76%, almost a point and a half lower. Participation falls to 63%. The employment–population ratio stays at 60%, because the same 120 people are working out of the same 200.
Worked example
Before: 8 ÷ 128 = 6.25%
After: 6 ÷ 126 = 4.76%
Employed ÷ population: 120 ÷ 200 = 60% both times
It happens in real data: June to July 2026
Seasonally adjusted, June 2026 had 162.264 million people employed and 7.094 million unemployed in a population of 275.166 million: an unemployment rate of 4.19%, published as 4.2%. In July employment fell by 87,000 and the number unemployed fell by 178,000, so the labor force shrank by 264,000 while the population grew by 116,000. The unemployment rate fell to 4.09%, published as 4.1%.
The headline improved in a month when fewer people were working. The rise of 380,000 in people outside the labor force did the work: participation slipped from 61.5% to 61.4% and the employment–population ratio from 59.0% to 58.9%. Had those 264,000 people been counted as unemployed instead of leaving the labor force, July's rate would have been 4.24%, a rise rather than a fall.
Worked example
Thousands, seasonally adjusted
June: 7,094 ÷ 169,358 = 4.19%
July: 6,916 ÷ 169,094 = 4.09%
Employed: 162,264 → 162,177 (−87)
And it runs the other way: July to August
In August employment rose by 569,000. The unemployment rate did not fall: it rose from 4.09% to 4.14% and was published unchanged at 4.1%. The labor force grew by 683,000, five times the population's increase of 133,000, as 550,000 fewer people were outside it. People who start looking for work count as unemployed until they find a job, so a wave of returning job seekers lifts the rate even while hiring is strong.
Participation rose from 61.4% to 61.6% and the employment–population ratio from 58.9% to 59.1%. Read alone, the unemployment rate called July an improvement and August flat; the employment–population ratio called July a decline and August a gain.
Worked example
Thousands, seasonally adjusted
July: 6,916 ÷ 169,094 = 4.09%
August: 7,031 ÷ 169,777 = 4.14%
Employed: 162,177 → 162,746 (+569)
Why economists watch the employment–population ratio
The employment–population ratio does not depend on whether someone without a job is searching, so a discouraged worker cannot move it. That makes it the steadier reading of how many people are working. Its weakness is age: the ratio for everyone 16 and over falls as a large generation retires, even in a strong job market, because retirees stay in the population it divides by.
For that reason the ratio for people aged 25 to 54, the prime working years when school and retirement matter least, is the version most often used to judge the labor market's health, and participation is read the same way. The unemployment rate stays the headline because it answers a narrower question, how hard it is for people who want work and are looking to find it, and it answers that one well.
Discouraged workers and the wider U-6 rate
People who want a job, are available for one, and have looked in the past 12 months but not in the past four weeks are marginally attached to the labor force. Those among them who give a job-market reason for not looking, such as believing no work is available or that they would not be hired, are the subset called discouraged workers. Neither group is counted as unemployed.
The broadest official rate, U-6, adds them back, together with people working part time who want full-time work and cannot find it. In the round-number example, counting the 2 discouraged workers restores the rate to 8 ÷ 128 = 6.25%, the figure from before they stopped looking. When U-6 rises while the headline rate holds still, more of the slack is sitting outside the headline's definition.
Worked example
Round-number example, no part-timers
(6 + 2) ÷ (126 + 2) = 6.25%
Common mistakes
Reading a falling unemployment rate as job growth.Check employment and the employment–population ratio in the same release; in July 2026 the rate fell while employment fell.Dividing the unemployed by the whole population.The unemployment rate divides by the labor force: July's 6,916 ÷ 275,282 is 2.5%, not the published 4.1%.Setting the household survey's employment change against payroll jobs.The household survey counts people once each, including the self-employed; the payroll survey counts jobs on employers' books, so their monthly changes often differ widely.Treating falling participation as weakness by default.An ageing population lowers the 16-and-over rate year after year; compare the 25–54 rate before drawing a conclusion.