Economic Concern: Unemployment Rate

Unemployment Rate

The unemployment rate is a percentage that measures the number of unemployed individuals in an economy as a fraction of the labor force, and those wanting to work who do not have jobs. The equation is as follows:

Unemployment rate=(Number of unemployed/Labor Force) x 100,

where the labor force consists of all of the employed and unemployed individuals in the economy. The labor force does not include full time students, homemakers, retirees, or discouraged workers; those who have given up looking for work.

The reason why it is important to macroeconomics is because first off it is a measure of overall performance of an economy. Labor is the “chief resource” of any economy and in order to measure the efficiency of an economy it is imperative to know how well the economy is using the resources. Policymakers looking to influence the economy are greatly concerned with the unemployment rate because if individuals cannot find jobs they subsequently will be spending less money and since expenditures of one are the incomes of others, declining consumption contributes to declining GDP. Wikipedia.org states that “the results of [high unemployment]… lead to less productivity and is claimed to incur a higher cost on society as a whole. The results lead to not just higher unemployment but may increase poverty.”

Mankiw mentions that every month the U.S. Bureau of Labor Statistics computes the unemployment rate from a survey of approximately 60,000 households. This is referred to as the Current Population Survey. Mankiw further states that “based on the responses to survey questions, each adult (16 years and older) in each household is placed into one of three categories: Employed, Unemployed, Not in the labor force.” Individuals deemed employed include full-time year-round employment and also temp work or part time employment such as substitute teachers. f [surveyed individuals] did any work at all for pay or profit during the survey week, or ave a job at which they did not work during the survey week because they were they are also counted as employed and reported as such by the BLS. Surveyed individuals are also counted as "employed" if they have a job at which they did not work during the survey week because they were on vacation, sick and absent, taking care of a loved one or another family obligation, on maternity leave, possibly involved in an industrial dispute such as a lock out or strike, or were unable to work due to weather conditions. (Wikipedia.org). Unemployed individuals include those that don’t have a job, are willing and able to work and have been searching for work within the past four weeks, and those laid off. Those not considered to be in the labor force are denoted as such if they have no job and aren’t looking. Individuals comprising this group include the elderly, children, mentally disabled etc. (Wikipedia.org.)

Policymakers