Practice
Unemployment and labor force participation
Who is in the labor force, the unemployment rate, and the labor force participation rate.
The skill
The labor force is everyone with a job plus everyone without one who is actively looking for work. The unemployment rate is the number unemployed divided by the labor force, and the labor force participation rate is the labor force divided by the adult population. People who are not looking for work sit outside the labor force, so they appear in neither part of the unemployment rate. Dividing by the whole adult population instead of the labor force is the mistake to watch for.
A worked example
A survey of every adult in a small country finds the following.
| Status | People |
|---|---|
| Have a job | 176,500 |
| No job, and actively looking for work | 7,600 |
| No job, and not looking for work | 105,400 |
What is the unemployment rate, as a percent? Round to one decimal place.
Solution
- The labor force is everyone working or looking for work: 176,500 + 7,600 = 184,100. People not looking for work are not in it.
- Unemployment rate = unemployed ÷ labor force = 7,600 ÷ 184,100 ≈ 4.1%.
- Adult population = 184,100 + 105,400 = 289,500, so the participation rate = 184,100 ÷ 289,500 ≈ 63.6%.
Answer: 4.1%