Social Sciences and History / Unit 14 SSH 1318 worked example, 60 to 90 seconds
The Rate's Denominator: Computing Unemployment
The idea
The exam gives population counts and asks the unemployment rate, or the participation rate, and the anchor's definitions are the arithmetic. The unemployment rate is the number unemployed divided by the labor force, not the overall adult population. The labor force participation rate is the share of adults who are either employed or unemployed and looking. The Current Population Survey, run by the Census Bureau for the Bureau of Labor Statistics, measures the share of the labor force unemployed; the establishment payroll survey measures the net change in jobs each month. Unemployment costs the jobless income and stress and costs the economy the opportunity cost of unused resources.
In practice
Given "two hundred adults: one hundred twenty employed, ten unemployed and looking, seventy neither", the labor force is one hundred thirty, the unemployment rate ten over one hundred thirty, about seven point seven percent, and participation one hundred thirty over two hundred, sixty-five percent. Given "the discouraged stop looking", the rate falls though no one found work, because they left the denominator and the numerator together. Ask first who is in the labor force.
Where people slip
The trap is dividing by the adult population, which understates the rate. The second trap is reading a falling rate as good news without checking participation.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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