Question

The labor force is 140 million and the unemployment rate is 5 percent. Due to a long recession, one million unemployed workers stopped looking for a job. WAP is 150 million.

1-Calculate the new unemployment rate.

a)4.040%

b)4.202%

c)4.264%

d)4.317%

2-Calculate the new employment rate.

a)82.333%

b)88.667%

c)76.000%

d)63.333%

3-Calculate the new LFPR.

a)86.000%

b)66.000%

c)92.667%

d)79.333%

Answer 1

Question 1

Unemployment rate is given by the following formula:

Unemployment rate = number of unemployed /labor force *100

Labor force= number of unemployed +number of employed

Before recession:

Unemployment rate= number of unemployed / labor force *100

5 = number of unemployed/140 *100

Number of unemployed = 7 million

Now, after recession, 1 million people stopped looking for job, therefore they won't be counted as part of number of unemployed and labor force.

New number of people unemployed = 6 million

New labor force= 139

New unemployment rate = number of unemployed /labor force *100

= 6/139 *100

= 600/139

New unemployed persons = 4.317%

Question 2

New employed persons= New labor force - new number of unemployed

New employed persons= 139-6= 133 million

Employment rate = number of employed /labor force *100

= 133/139 *100

New employment rate = 95.68%

Question 3

New labor force participation rate = new labor force / working age population *100

= 139/150 *100

LFPR = 92.66%