Question

1.

A) In one paragraph, explain official unemployment rate is. What does it include? What does it exclude? what are issues with the current way it is measured? What is the unemployment rate in the economy today?

B) In one paragraph, Is the official unemployment rate one one we should be using? If not provide an alternative way to measure US employment. Use economic concepts.

Answer 1

A. The official unemployment rate is U3. It is calculated by dividing the number of unemployed people by the number of people in the labor force which consists of both the employed and unemployed people. It includes people who are willing and able to work and who have actively sought work within the past four weeks. In the labor force calculation, it considers people with temporary, part time and full time jobs as employed and those performing atleast 15 hours of unpaid family work are also considered as employed. However, it excludes who would like to work but cannot because of a disability, or have become discouraged after looking for work without success. The main issue with the current way in which it is measured is the exclusion of discouraged workers from total number of unemployed in an economy.It also fails to make a distinction between part time, full time work. They should be treated as unemployed. The recent figures from Bureau of Labor Statistics show that the unemployment rate for April 2019 has dipped to 3.6 per cent.

B. Thus, it can be stated that U3 underestimates the unemployment rate in the economy and thus, BLS releases other measures and among them U5 is referred to as the real unemployment rate. This measure calculates total number of unemployed people as = Unemployed +marginally attached + part-time for economic reasons. Thus, it is the most comprehensive measure of unemployment because it includes discouraged workers, and ayone who would like a job and has looked fro the one in the past 12 months but now has given up. It also includes part time workers who would like to settle for a full time job. The current level of U6 in the US is 7.6 per cent,