Question

How is the labor force defined and who measures it? How is the unemployment rate calculated? Does an increase in the unemployment rate necessarily mean a decline in the size of the labor force?

Answer 1

Measure of Labor Force

The U.S. Bureau of Labor Statistics (BLS) measures the labor force as people over 16 years of age who are actively seeking work.The labor force is the number of people who are employed plus the unemployed who are looking for work.The labor pool does not include the jobless who aren't looking for work.

Unemployement Rate

The unemployment rate is the number of unemployed persons divided by the labor force.We can calculate the unemployment rate by dividing the number of unemployed people by the total number in the labor force, then multiplying by 100.

The unemployment rate is usually the number of unemployed people in the labor force. It is referred to as a lagging indicator since it changes with changes in the economic conditions. An increased unemployment rate has an adverse effect on the economy. The unemployment rate measures the overall number of workers in the labor force. Therefore, a declining number of the labor force does not necessarily mean there are increased unemployment rates. If people's rates without jobs go up, the overall number of the labor force increases proportionately. Additionally, when unemployment rates and labor force figures are used in conjunction, it helps evaluate the economy's health.