Question

Working with labor force statistics

You are looking over data on the U.S. labor force, employment, unemployment, persons not in the labor force, and discouraged workers from the November 2019 Current Population Survey. You are particularly interested in the problem of discouraged workers. You make several quick calculations.

First, you determine the official unemployment rate.

Second, you determine the unemployment rate if all discouraged workers are considered to be part of the labor force (and thus, unemployed).

Finally, you calculate what would happen to the official unemployment rate if 500 of the discouraged workers begin actively searching for work.

When you write a report on labor market dynamics, which of the unemployment rate measures will you choose as a gauge of the state of the labor market in November 2019? Why?

	November 2019 (numbers in thousands)
Civilian noninstitutional population	260,020
Civilian labor force	164,404
Employed	158,593
Unemployed	5,811
Unemployment rate
Not in labor force	95,616
Discouraged workers	4,831
Unemployment rate including all discouraged workers
Official unemployment rate if 500 discouraged workers re-enter the labor force

Answer 1

Unemployment rate = Unemployed/Civilian labor force = 5811/164404 = 3.53%

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Now assume discourage workers are part of labor force and is considered unemployed, hence, total unemployed = 5811 + 4831 = 10642

Total Civilian labor force = 164404 + 4831 = 169235

Hence, unemployment rate including all discouraged workers = 10642/169235 = 6.29%

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When 500 discourage workers re-enter the labor force, Total Civilian labor force = 164404 + 500 = 164904

Unemployed = 5811

Official unemployment rate if 500 disocuraged workers re-enter the labor force = 5811/164904 =3.52%

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The unemployment rate measures that will be choosen to gauge the state of the labor market in November 2019 is Official unemployment rate if 500 disocuraged workers re-enter the labor force.

This will help in taking into account the labor market dynamics that exists in November. The discouraged workers that are out of labor force are by definition not be considered as unemployed or a part of labor force unless they enter labor force and become unemployed.

For unemployment rate determination, the prospect is expected to be actively seeking for employment.