Question

In: Economics

The BLS calculates the official unemployment rate as ratio of the number of people unemployed to...

The BLS calculates the official unemployment rate as ratio of the number of people unemployed to the labor force.

Does this figure correctly reflect the the magnitude of the unemployment problem? Is it an overestimate? Underestimate? Discuss.

Solutions

Expert Solution

The Bureau of Labour Statistics calculates the official unemployment rate as ratio of the number of peoples unemployed to the labour. This figure correctly reflect the magnitude of the unemployment problem only if Bureau of Labour Statistics conducted correct survey and classify and analyze the data by taking enough time Most of the time official unemployment rate may underestimate the real unemployment rate. The true rate may be even higher than 20 %. Due to quirk in the BLS methodology , it always underestimate the true rate of unemployment. While collecting data to find unemployment rate, surveys and interviews are conducted and individuals are classified as either employed , unemployed or not in labour force was based on their answers to questions created by BLS. Because interviewers were told to classify people who were employed but absent from work due to Covid 19 issues. But many interviewers did this incorrectly. It underestimates the true unemployment rate. BLS may used the data that just was not designed for a moment where entire sectors of economy shut down by leaving millions of unemployed people due to coronavirus. BLS revisions may skew higher .BLS may use quickly outdated syllabus


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