pcecon.com Class Notes
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First, we consider who is in the labor force:
Everyone over 16 who is working or looking for work (in the last four weeks) is part of the labor force. If you're a kid, or if you don't want a job, you aren't part of the labor force. If you want a job, but don't have one because you have been promised one or expect to start one soon, you are still in the labor force, even if you are not looking for a job.
Then, we consider who is unemployed:
Some of the people in the labor force are unemployed, which means they want to work (so they're in the labor force) but they are not working.
We can also figure out the percentage of people in the labor force that are unemployed. This is the unemployment rate:
Unemployment rate=
number of unemployed people
number of people in labor force
An example:
The population of Firebird City is 800,000
of those, the number working is 400,000
the number not working is 400,000
the number who are looking for work (but not working) is 50,000
What is the unemployment rate?
The labor force =400,000 + 50,000 =450,000
50,000 people are unemployed (willing to work, but not working), so the unemployment rate is
50,000
450,000 = 11.11%
The labor force participation rate is
450,000
800,000 = 56.25%