information:highlighting, information:classification
Limitations of definition

Some critics believe that current methods of measuring unemployment are inaccurate in terms of the impact of unemployment on people as these methods do not take into account the 1.5% of the available working population incarcerated in US prisons (who may or may not be working while they are incarcerated); those who have lost their jobs and have become discouraged over time from actively looking for work; those who are self-employed or wish to become self-employed, such as tradesmen or building contractors or information technology consultants; those who have retired before the official retirement age but would still like to work (involuntary early retirees); those on disability pensions who do not possess full health but still wish to work in occupations suitable for their medical conditions; or those who work for payment for as little as one hour per week but would like to work full time.

The last people are "involuntary part-time" workers, those who are underemployed, such as a computer programmer who is working in a retail store until he can find a permanent job, involuntary stay-at-home mothers who would prefer to work, and graduate and professional school students who are unable to find worthwhile jobs after they graduated with their bachelor's degrees.

Internationally, some nations' unemployment rates are sometimes muted or appear less severe because of the number of self-employed individuals working in agriculture. Small independent farmers are often considered self-employed and so cannot be unemployed. That can impact non-industrialized economies, such as the United States and Europe in the early 19th century, since overall unemployment was approximately 3% because so many individuals were self-employed, independent farmers; however, non-agricultural unemployment was as high as 80%.

Many economies industrialize and so experience increasing numbers of non-agricultural workers. For example, the United States' non-agricultural labour force increased from 20% in 1800 to 50% in 1850 and 97% in 2000. The shift away from self-employment increases the percentage of the population that is included in unemployment rates. When unemployment rates between countries or time periods are compared, it is best to consider differences in their levels of industrialization and self-employment.

Additionally, the measures of employment and unemployment may be "too high". In some countries, the availability of unemployment benefits can inflate statistics by giving an incentive to register as unemployed. People who do not seek work may choose to declare themselves unemployed to get benefits; people with undeclared paid occupations may try to get unemployment benefits in addition to the money that they earn from their work.

However, in the United States, Canada, Mexico, Australia, Japan, and the European Union, unemployment is measured using a sample survey (akin to a Gallup poll). According to the BLS, a number of Eastern European nations have instituted labour force surveys as well. The sample survey has its own problems because the total number of workers in the economy is calculated based on a sample, rather than a census.

It is possible to be neither employed nor unemployed by ILO definitions by being outside of the "labour force". Such people have no job and are not looking for one. Many of them go to school or are retired. Family responsibilities keep others out of the labour force. Still others have a physical or mental disability that prevents them from participating in the labour force. Some people simply elect not to work and prefer to be dependent on others for sustenance.

Typically, employment and the labour force include only work that is done for monetary gain. Hence, a homemaker is neither part of the labour force nor unemployed. Also, full-time students and prisoners are considered to be neither part of the labour force nor unemployed. The number of prisoners can be important. In 1999, economists Lawrence F. Katz and Alan B. Krueger estimated that increased incarceration lowered measured unemployment in the United States by 0.17% between 1985 and the late 1990s.

In particular, as of 2005, roughly 0.7% of the US population is incarcerated (1.5% of the available working population). Additionally, children, the elderly, and some individuals with disabilities are typically not counted as part of the labour force and so are not included in the unemployment statistics. However, some elderly and many disabled individuals are active in the labour market.

In the early stages of an economic boom, unemployment often rises. That is because people join the labour market (give up studying, start a job hunt, etc.) as a result of the improving job market, but until they have actually found a position, they are counted as unemployed. Similarly, during a recession, the increase in the unemployment rate is moderated by people leaving the labour force or being otherwise discounted from the labour force, such as with the self-employed.

For the fourth quarter of 2004, according to OECD (Employment Outlook 2005 ISBN 92-64-01045-9), normalized unemployment for men aged 25 to 54 was 4.6% in the US and 7.4% in France. At the same time and for the same population, the employment rate (number of workers divided by population) was 86.3% in the US and 86.7% in France. That example shows that the unemployment rate was 60% higher in France than in the US, but more people in that demographic were working in France than in the US, which is counterintuitive if it is expected that the unemployment rate reflects the health of the labour market.

Those deficiencies make many labour market economists prefer to look at a range of economic statistics such as labour market participation rate, the percentage of people between 15 and 64 who are currently employed or searching for employment, the total number of full-time jobs in an economy, the number of people seeking work as a raw number and not a percentage, and the total number of person-hours worked in a month compared to the total number of person-hours people would like to work. In particular, the National Bureau of Economic Research does not use the unemployment rate but prefers various employment rates to date recessions.