Unemployment and the Economy

Unemployment and the Economy

The labor force participation rate is the percentage of the total adult population in the labor force who are either employed or actively looking for employment. It is figured by dividing the labor force (employed plus unemployed) by the working age (adult) population. The labor force participation rate for May 2014 was 62.8% which is a decrease from the 66.1% in May of 2008. The average for the first five months of 2014 is 62.96% and in 2008, the average for the first five months was 66.06%. Many factors can contribute to the decrease in the labor force participation rate. Many baby boomers are at retirement age and leave the workforce which can lower the rate. During times of recession, companies will lower their production and lay off workers, which can also bring the rate down. When laborers are actively looking for employment but the recession is a factor, they may stop looking because they get discouraged. All of these can be contributors to a lower labor force participation rate. Layoffs can create more unemployed workers which does not affect the labor force directly, but some of which may become discouraged and leave the labor force lowering the participation rate (Bureau of Labor and Statistics, 2014). The current rate shows the state of the economy is slower.

The unemployment rate is a percentage figured by dividing the number of unemployed by the labor force (number of employed plus number of unemployed) and multiplying by 100 (Mankiw, 2012, p. 587). The labor force participation is figured into the unemployment rate. When media reports statistics that are provided by the BLS but can craft a different story based on which measure they choose to use (South University Online, 2014, p. 483). For any given measure, there is the same relationship between the unemployment rate and the labor force participation rate and the denominator of the employment rate (Bureau of Labor and Statistics, 2014).

Unemployment means members of the labor force who are unemployed by actively looking for work. The Bureau of Labor Statistics (BLS) collects the number of people who are receiving unemployment insurance on a monthly basis. It would be very difficult for the bureau to obtain complete unemployment information unless they contact every household for current unemployment information. The statistics are not perfect because there are people whose benefits have run out, are not eligible, or never apply for benefits. The unemployment rates that the bureau figure and report are based on unemployment insurance figures (Bureau of Labor and Statistics, 2014). The formula is a percentage of the number of unemployed individuals divided by the labor force and multiplied by 100.

A discouraged worker is a laborer who is unemployed, cannot find work, and therefore, drops out of the labor force because they become disheartened and give up because they cannot