Question

Labor markets

a) The US working-age population is approximately 200 million people. In February, there were approximately 125 million people with paid work and 5 million people unemployed.  

What was the Unemployment Rate and the Labor Force Participation Rate?  

b) As of the released data today, there are about 102 million people with paid work and 18 million unemployed. What does that give for the Unemployment Rate and the Labor Force Participation Rate? I notice that the labor force seems to have shrunk. That’s not because all those people died is it? Please explain!  

Answer 1

a) Given,

Working-age population = 200 million

Number of Employed = 125 million

Number of Unemployed = 5 million

Labor force = Number of employed + Number of unemployed = 125 million + 5 million = 130 milion

Unemployment rate = (Number of unemployed/Labor force) * 100 = (5 million/130 million) * 100 =3.85%

Labor force participation rate = (Labor force/Working-age population) * 100 = (130 million/200 million) * 100 = 65.00%

b) Number of employed = 102 million

Number of Unemployed = 18 million

Labor force = Number of employed + Number of unemployed = 102 million + 18 million = 120 million

Unemployment rate = (Number of unemployed/Labor force) * 100 = (18 million/120 million) * 100 = 15.00%

Labor force participation rate = (Labor force/Working-age population) * 100 = (120 million/200 million) * 100 = 60.00%

One reason why the labor force might have shrunk:

Increase in the unemployment rate might have discouraged many unemployed workers to give up looking for jobs. Note that discouraged workers are not counted as a part of labor force.

The population is assumed to be stable for the sake of our calculations as there is no other data provided about the same.