Macroeconomics

‭D. Unemployment‬ ‭Definition and Measurement‬ ‭Unemployment‬‭serves‬‭as‬‭a‬‭critical‬‭indicator‬‭of‬‭economic‬‭performance‬ ‭.‬‭It‬‭is‬‭monitored‬‭by‬‭economists,‬ ‭policymakers, and individuals alike to gauge the overall health and stability of an economy.‬ ‭Unemployment‬‭occurs‬‭when‬‭people‬‭who‬‭are‬ ‭willing‬‭and‬‭able‬‭to‬‭work‬‭cannot‬‭fnd‬‭a‬‭job.‬ ‭This‬‭does‬‭not‬ ‭mean‬ ‭that‬ ‭all‬ ‭individuals‬ ‭who‬ ‭are‬ ‭not‬ ‭working‬ ‭are‬ ‭unemployed.‬‭For‬‭example,‬‭some‬‭adults‬‭are‬‭retired,‬ ‭while children are too young to work.‬ ‭In‬ ‭the‬‭U.S.,‬‭the‬‭Bureau‬‭of‬‭Labor‬‭Statistics‬‭gathers‬‭data‬‭from‬‭thousands‬‭of‬‭households‬‭to‬‭measure‬‭the‬ ‭unemployment‬ ‭rate.‬ ‭The‬ ‭surveyed‬ ‭households‬ ‭are‬ ‭then‬ ‭classifed‬ ‭into‬ ‭three‬ ‭groups:‬ ‭employed,‬ ‭unemployed, and out of the labor force.‬ ‭People‬ ‭are‬‭considered‬ ‭employed‬ ‭when‬‭they‬ ‭hold‬‭a‬‭job‬‭that‬‭yields‬‭an‬‭earning‬ ‭.‬‭This‬‭includes‬‭part-time‬ ‭and full-time work.‬

‭People‬ ‭who‬ ‭are‬ ‭not‬ ‭employed‬ ‭fall‬ ‭into‬ ‭two‬ ‭categories:‬ ‭unemployed or not in the labor force.‬ ‭To‬‭be‬‭considered‬ ‭unemployed‬ ‭,‬‭a‬‭person‬‭has‬‭to‬‭be‬ ‭16‬‭years‬ ‭or older‬ ‭,‬ ‭able to work‬ ‭, but‬ ‭cannot fnd a job‬ ‭.‬ ‭People‬‭not‬‭looking‬‭for‬‭a‬‭job‬‭because‬‭they‬‭do‬‭not‬‭want‬‭one‬ ‭or‬ ‭have‬ ‭given‬ ‭up‬ ‭looking‬‭are‬‭classifed‬‭as‬ ‭not‬‭in‬‭the‬‭labor‬ ‭force‬ ‭.‬‭These‬‭include‬‭full-time‬‭students,‬‭retirees,‬‭people‬‭in‬ ‭institutions,‬ ‭stay-at-home‬ ‭people‬ ‭caring‬ ‭for‬ ‭children,‬ ‭and‬ ‭discouraged workers (those who gave up looking for work).‬

‭The‬ ‭level‬‭of‬‭unemployment‬ ‭represents‬‭the‬ ‭total‬‭number‬‭of‬‭people‬‭who‬‭are‬‭unemployed‬ ‭,‬‭whereas‬‭the‬ ‭unemployment rate‬ ‭refers to‬ ‭the number of unemployed‬‭people as a percentage of the labor force‬ ‭.‬

‭Let’s dissect the calculation of the unemployment rate:‬

‭●‬ ‭The‬ ‭labor force‬ ‭represents the number of people employed‬‭plus the number of the unemployed.‬ ‭Labor force = employed + unemployed‬ ‭●‬ ‭The‬ ‭total‬ ‭or‬ ‭eligible‬ ‭population‬ ‭of‬ ‭those‬ ‭who‬ ‭are‬ ‭16‬ ‭years‬ ‭or‬ ‭older‬ ‭is‬ ‭equal‬‭to‬‭the‬‭number‬‭of‬ ‭people in the labor force plus the number not in the labor force.‬

‭Eligible population = labor force + not in labor force‬

‭With these numbers, we can calculate two important ratios:‬

‭1.‬ ‭The‬ ‭unemployment‬ ‭rate‬ ‭,‬ ‭which‬ ‭is‬ ‭the‬ ‭ratio‬ ‭of‬ ‭the‬ ‭number‬ ‭of‬ ‭people‬ ‭unemployed‬ ‭to‬ ‭the‬ ‭total‬ ‭number of people in the labor force:‬

‭70‬

‭© 2024 ACHIEVE ULTIMATE CREDIT-BY-EXAM GUIDE‬‭|‬‭MACROECONOMICS‬