Unemployment is calculated by taking the number of people who are unemployed and dividing that by the labor force and then multiplying that by 100

Unemployment is calculated by taking the number of people who are unemployed and dividing that by the labor force and then multiplying that by 100 (UE = (# employees / Labor force) X 100). Labor force is defined as the total number of people who are unemployed and employed. To be considered unemployed, an individual must not only be not working, but must also be actively looking for employment. Employed is defined as anyone who is currently legally working, with the exception of anyone in the military, so essentially civilian employees (Gwartney et al., 2018). Workers who are not actively seeking employment, known as discouraged workers, are not counted in unemployment if they have not looked for a job in the last four weeks before the statistics are calculated (Dixon, 2018).Currently unemployment (Q1 2021) is at 6.2%. As of Q4 2020, unemployment was at 6.7%m Q3 2020 unemployment was at 8.8%, and Q2 2020 unemployment was at 13% (US Unemployment Rate, 2021). Unemployment rates have been decreasing since the spike that took place when the pandemic shut down entire states.

Unemployment is talked about in business news due to the fact that it shows the percentage of the labor face that does not have a job, providing a snap shot of how many people are looking for employment. Unemployment is also an indicator of how the economy is doing. Businesses want to know how the economy is doing and when the unemployment rate is high, it is an indicator that there may an issue in the economy (DeSilver, 217). Unemployment is an important metric that indicates which direction the economy is headed.Unemployment numbers can be both questioned from an accuracy standpoint as well as a relevancy perspective for a couple reasons. Individuals who are working illegally (or under the table), but are actively looking for legal work are counted in the unemployment numbers. This can exaggerate the unemployment numbers. In order for an individual to be considered unemployed, they have to be actively seeking employment. What is not mentioned is how that information is gathered and calculated in an accurate and timely manner (Dixon, 2018). Discouraged workers are not counted in the unemployment count. Although these individuals could have been searching for a job for over a year, if they have given up and did not look in the last four weeks before the statistical data was compiled, they were not counted as being unemployed (Dixon, 2018). Although some individuals may take a part time job while still searching for full time work in order to put food on the table for their families, they are not counted as unemployed, even though these individuals may be facing severe financial hardships. The lack of unemployed status may make it hard for these individuals to get assistance that they need (Dixon, 2018).There are four phases of the business cycle, peak, recession, trough, and expansion or recovery. Unemployment increases during the recession period of the business cycle and decreases during the expansion period of the business cycle (Unemployment and Inflation, n.d.).

 

Resources:

DeSilver, D. (2017, March 7). What the unemployment rate does – and doesn\’t – say about the economy. Pew Research Center. https://www.pewresearch.org/fact-tank/2017/03/07/employment-vs-unemployment-different-stories-from-the-jobs-numbers/.

Dixon, A. (2018, May 21). Top 5 Problems With the Unemployment Rate. SmartAsset. https://smartasset.com/career/problems-with-the-unemployment-rate.

Gwartney, J. A., Stroup, R. L., Sobel, R. L., & Macpherson, D. A. (2018). Macroeconomics: Private and public choice (16th ed.). Retrieved from https://www.cengage.comUnemployment and Inflation.

Harper College. (n.d.). http://www2.harpercollege.edu/mhealy/eco212i/lectures/ch9-18.htm.US Unemployment Rate. (2021). https://ycharts.com/indicators/us_unemployment_rate_quarterly#:~:text=Basic%20Info,long%20term%20average%20of%206.36%25.