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Unemployment
 What Is Unemployment?
 The BLS defines unemployment very
specifically. To count as unemployed, out-of-
work employees must have these three
qualities:
1. They aren't working, even part-time or
temporary.
2.They are available to work.
3.They actively looked for work in the past four
weeks.
2
IDENTIFYING UNEMPLOYMENT
• How Is Unemployment Measured?
– Categories of Unemployment
• The problem of unemployment is usually divided into
two categories, the long-run problem and the short-run
problem.
• The natural rate of unemployment
• The cyclical rate of unemployment

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How Is Unemployment Measured?

• Cyclical Unemployment
• Cyclical unemployment refers to the year-to-year
fluctuations in unemployment around its natural
rate.
• It is associated with with short-term ups and downs
of the business cycle.

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How Is Unemployment Measured?

• Describing Unemployment: Three Basic

Questions
• How does government measure the economy’s rate
of unemployment?
• What problems arise in interpreting the
unemployment data?
• How long are the unemployed typically without
work?

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How Is Unemployment Measured?

• Unemployment is measured by the Bureau of

Labor Statistics (BLS).
• It surveys 60,000 randomly selected households
every month.
• The survey is called the
Current Population Survey.

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How Is Unemployment Measured?

• Based on the answers to the survey questions,

the BLS places each adult into one of three
categories:
• Employed
• Unemployed
• Not in the labor force

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How Is Unemployment Measured?

• Employed vs. unemployed

• The BLS considers a person an adult if he or she is over 16
years old.
• A person is considered employed if he or she has spent some
of the previous week working at a paid job.
• A person is unemployed if he or she is on temporary layoff,
is looking for a job, or is waiting for the start date of a new
job.
• A person who fits neither of these categories, such as a full-
time student, homemaker, or retiree, is not in the labor force.

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How Is Unemployment Measured?

• Labor Force
• The labor force is the total number of workers,
including both the employed and the unemployed.
• The BLS defines the labor force as the sum of the
employed and the unemployed.

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Figure 1 The Breakdown of the Population in 2004

Employed
Labor Force
(139.3 million)
(147.4 million)

Adult
Population
(223.4 million)
Unemployed (8.1 million)

Not in labor force

(76.0 million)

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How Is Unemployment Measured?

• The unemployment rate is calculated as the

percentage of the labor force that is
unemployed.

N u m b er u n e m p lo y ed
U n em p lo y m en t rate = 1 0 0
L ab o r fo rce

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How Is Unemployment Measured?

• The labor-force participation rate is the

percentage of the adult population that is in the
labor force.
Labor force participation rate

Labor force X
 100
Adult population

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 A C T I V EL EA RN I N
1G Calculate labor force statistics
Compute the labor force, u-rate, adult
population, and labor force participation rate
using this data:
Adult population of the U.S. by
group, September 2013

# of employed 144.3 million

# of unemployed 11.3 million

not in labor force 90.6 million

© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
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 A C T I V EL EA RN I N
1G Answers
Labor =employed + unemployed
force
= 144.3 + 11.3
= 155.6 million

U-rate = 100 x (unemployed)/(labor force)

= 100 x 11.3/155.6
= 7.3%

© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
© 2007 Thomson South-Western
 A C T I V EL EA RN I N 1
G

Answers
Population = labor force + not in labor force
= 155.6 + 90.6
= 246.2

LF partic. rate = 100 x (labor force)/(population)

= 100 x 155.6/246.2
= 63.2%

© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
© 2007 Thomson South-Western
© 2007 Thomson South-Western