It can be useful to compare economic statistics across countries, including unemployment rates. It’s not always easy to do so, and our post today explains why.
The unemployment rate is a ratio of two measures:
- the number of unemployed
- the total labor force
Both measures are subject to their own definitions and interpretations, with some tricky details. For example, what counts as “looking for work”? This question defines who’s unemployed vs. who’s outside the labor force. Does perusing a job-posting website suffice, or does it require actively sending resumes to businesses? Do teenagers count? Students? What about temporary layoffs?
The Organisation for Economic Co-operation and Development (OECD) standardizes economic measures across its member countries and publishes harmonized statistics, including unemployment rates.
Our FRED graph above shows the OECD’s harmonized unemployment measure (in blue) along with the Bureau of Labor Statistics’ measure (in red) for the US. Both these rates use the age range of 25 to 54 years and track each other remarkably well, hinting that their definitions are very similar.
The US unemployment rate that’s widely disseminated, though, covers those who are 16 years or older. This rate (in green) is higher and should not be used to compare the US unemployment rate with the rates in other countries.
How this graph was created: Search FRED for and select “OECD unemployment rate US 25-54.” Click on “Edit Graph,” open the “Add Line” tab and search for “unemployment rate,” take the UNRATE series, and change the frequency to quarterly (average over months). Repeat for “unemployment rate 25-54.”
Suggested by Christian Zimmermann.