How Economists Define and Compute Unemployment Rate

Review Questions

What is the difference between being unemployed and being out of the labor force?

How do you calculate the unemployment rate? How do you calculate the labor force participation rate?

Are all adults who do not hold jobs counted as unemployed?

If you are out of school but working part time, are you considered employed or unemployed in U.S. labor statistics? If you are a full time student and working 12 hours a week at the college cafeteria are you considered employed or not in the labor force? If you are a senior citizen who is collecting social security and a pension and working as a greeter at Wal-Mart are you considered employed or not in the labor force?

What happens to the unemployment rate when unemployed workers are reclassified as discouraged workers?

What happens to the labor force participation rate when employed individuals are reclassified as unemployed? What happens when they are reclassified as discouraged workers?

What are some of the problems with using the unemployment rate as an accurate measure of overall joblessness?

What criteria do the BLS use to count someone as employed? As unemployed?

Assess whether the following would be counted as “unemployed” in the Current Employment Statistics survey.

  1. A husband willingly stays home with children while his wife works.
  2. A manufacturing worker whose factory just closed down.
  3. A college student doing an unpaid summer internship.
  4. A retiree.
  5. Someone who has been out of work for two years but keeps looking for a job.
  6. Someone who has been out of work for two months but isn’t looking for a job.
  7. Someone who hates her present job and is actively looking for another one.
  8. Someone who decides to take a part time job because she could not find a full time position.