Principles of Macroeconomics / Unit 5 MAC 0423 worked example, 60 to 90 seconds
Reading an Unemployment Statistic
The idea
Before accepting an unemployment figure, ask four questions. Which measure is it, since the six official measures differ by several points? What is the denominator, the labor force rather than the population? What happened to participation over the same period, since a falling rate can mean people stopped looking? And what is the reference period, since the figure describes one week of one month and is revised later? A rate that fell while participation fell too is not the same news as a rate that fell while participation rose.
In practice
Worked example: a country's unemployment rate falls from eight percent to seven while its participation rate falls by two points. Fewer people are counted as unemployed because fewer are counted as being in the labor force at all. The same figures with participation rising would mean people returning to search and finding work, which is the opposite story from the same headline.
Where people slip
This is unit three's lesson applied to a different series: the number can be accurate and the impression it leaves can still be wrong. Read the rate beside the participation rate, always.
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