Defining Unemployment Flashcards

Defining Unemployment

• Employed

  • Individuals who work for pay.

• Unemployed

  • Individuals who are not employed but are available for work and are actively looking for a job.

• Not in the labor force

  • Individuals who are neither employed nor unemployed.

Breakdown of the Population

• The Bureau of Labor Statistics divides the adult population into three categories:
  • Employed.
  • Unemployed.
  • Not in the labor force.

Labor Force

• Labor force

  • The total number of workers, both employed and unemployed.
  • Labor\,Force = Employed + Unemployed

• Unemployment rate

  • The percentage of the labor force that is unemployed.

Unemployment Rate Calculation

• Unemployment rate formula:

  • Unemployment\,Rate = \frac{Number\,of\,unemployed}{Labor\, force} × 100

• Example:

  • Given a labor force of 154.1 million and 14.3 million unemployed:
  • Unemployment\,Rate = \frac{14.3\,million}{154.1\,million} × 100 = 9.3\, \%.

Official Unemployment Rate

• Official unemployment rate

  • Published by the Bureau of Labor Statistics (BLS) at BLS.gov.
  • Considered an imperfect measure of joblessness.

• Data Collection

  • Based on a monthly survey of 60,000 households.
  • Requires a 16-month survey commitment.

Discouraged Workers

• Discouraged workers
  • Individuals who would like to work but have given up looking for a job.
  • Problem: Not included in the official unemployment figures, potentially understating the true level of joblessness.

Duration of Unemployment

• Unemployment Spells

  • Most instances of unemployment are short-term.

• Long-Term Unemployment

  • The majority of unemployment observed at any given time is long-term.

• Impact

  • The economy’s unemployment problem is largely attributable to the relatively few workers who are jobless for long periods.

Alternative Measures of Labor Underutilization

• Table 2 provides alternative measures of labor underutilization.