The unemployment rate is defined as the percentage of unemployed workers in the total labor force. The unemployment rate includes workers who currently do not work, although they can do so. For 2021, the global unemployment rate is estimated to be between 6.3-6.5%, depending upon the source. The unemployment rate is a lagging indicator, meaning it responds (rises and falls) to changing economic conditions rather than influencing or predicting them. When the economy grows at a healthy rate, the job market is plentiful and the unemployment rate drops. When the economy is experiencing a recession or other turbulence, the job market tends to retract and the unemployment rate rises in response.
The challenge of comparing international unemployment rates
When evaluating the unemployment rates of countries in comparison with one another, it is vital to keep in mind that it is not always an apples-to-apples comparison. For starters, not every country has the same definition of unemployment—for instance, some countries say that if a person is able to work but not currently employed, that person is unemployed. But other countries only consider a person unemployed if they are actively seeking work. People who are not working and not looking for work are not considered unemployed. Obviously, these different definitions will have an impact on the unemployment rates posted by those countries.
To see this impact in action, examine the 2019 unemployment rate in South Africa, using data from the International Labour Organization. According to the ILOSTAT database, Unemployment is 29% when filtered using all three criteria (not employed, available, and looking), 38% when filtered by "not employed but available" with no measure of looking, and a full 40% when filtered by "not employed but looking" with no availability requirement.
Fortunately, most countries currently report their unemployment according to an established international standard, which makes it easier to ensure apples-to-apples data comparisons. But the possibility of a mismatch still exists and can be a helpful thing to keep in mind—especially if you encounter data that seem surprising. An additional concern is the timeliness of the data. Unemployment rates can change significantly from month to month, let alone year to year, so comparing one country's 2020 rate to another country's 2015 rate is likely to give an inaccurate impression. That said, if no new data have been released, older data are still better than no data at all.
Top Ten Countries with the Highest Unemployment (World Bank 2020 data):
- South Africa - 29.2%
- Kosovo (partially recognized) - 26.2%
- Djibouti - 26.1%
- West Bank& Gaza Strip (occupied Palestine) - 25.9%
- Equatorial Guinea - 25.0%
- Botswana - 24.9%
- Grenada - 22.9%
- Eswatini - 22.7%
- Lesotho - 22.4%
- Gabon - 20.4%
The impact of unemployment
Unemployment has many adverse effects, including: increased depression and other mental health problems, increased crime rates, overall lower economic productivity and consumption, lower rates of volunteerism, and erosion of skills. Surprisingly, exceptionally low unemployment can also create economic challenges, such as excessive inflation (when everyone is employed and has money to spend, demand for products can outstrip supply, which causes a rise in prices). This can lead to a rising cost of living, which can be particularly hard on citizens in developing and/or low-income countries.
In the United States, the Bureau of Labor Statistics uses six different methods to calculate the unemployment rate. The most widely used and cited unemployment statistic is U-3, which defines unemployed people as willing and able to work and who have actively searched for work in the past four weeks. Those who would like to work but are unable, such as those with disabilities, are not considered unemployed. As defined by the U-3 statistic, the number of unemployed people is divided by the number of people in the labor force and multiplied by 100.
Top Ten Countries with the Lowest Unemployment (World Bank 2020 data):
- El Salvador - 0.1% (tie)
- Qatar - 0.1% (tie)
- Myanmar - .05%
- Solomon Islands - 0.7%
- Chad - 1.1% (tie)
- Thailand - 1.1% (tie)
- Bahrain - 1.2% (tie)
- Cambodia - 1.2% (tie)
- Malawi - 1.3%
- Palau - 1.4%
What unemployment numbers don't tell us
A low unemployment rate does not necessarily indicate that a country's people are living in favorable, sustainable conditions. A report released by the International Labor Organization found that many of the 3.3 billion people throughout the world who are technically employed are working under substandard conditions that offer too little pay, poor economic security, and little to no opportunity for advancement.
The effect of the COVID-19 pandemic on unemployment
The International Labor Organization's World Employment and Social Outlook: Trends 2019 reported that the global unemployment rate dropped below 5% in 2018, the lowest since the 2008 financial crisis. That percentage did not last, however, thanks in no small part to the COVID-19 pandemic of 2020. According to the Bureau of Labor Statistics, the U.S. unemployment rate was 3.8% before the COVID-19 pandemic (February 2020). By May 2020, the unemployment rate may have risen as high as 16%. By September 2020, the unemployment rate decreased to 7.9%.
The three types of unemployment
There are three types of unemployment: frictional, structural, and seasonal. Frictional unemployment refers to temporary unemployment during the period when someone is searching for a job. Structural unemployment is the mismatch between workers' skills or locations and job requirements. Seasonal unemployment is caused by seasonal changes in a population's activity, such as tourism or agriculture.