Question

8. Unemployment rate, employment rate and labour force participation rate are three typical measures for economic conditions. Answer the followings.

a. Explain the basic concepts of labour force participation rate, employment rate, unemployment rate

b. Describe circumstances under which that measure would be preferred to the other two.

c. Under what conditions will these three measures all move in the same directions? Under what conditions would these move in opposite directions?

Answer 1

A.

Labor force participation rate explains the number of people willing as well as doing the job out of the total civil adult population. Hence ,it measures the % of population that is labor force.

Unemployment rate explains the % of labor force that is unemployed, whereas employment rate tells the % of people employed out of the labor force. Here, labor force is used as denominator to calculate unemployment and employment rate.

B.

In a circumstances when we want to know the % of people would want to do the job, or labor force size of the population, then labour force participation rate is preferred. In a circumstances, when employed people % in a workforce is required or labor market condition is assessed, then employment and unemployment rate is preferred.

C.

When there is economic boom as well as technology shift, then labor force participation and employment rate increases, though unemployment increases for a short run as people become unemployed due to structural change of technology.

When migration increases ,then labor force demand increases, leading to increase in employment rate. It leads to decrease in unemployment rate.