Unemployment is a measurement that describes how many people are unemployed out of the total labor force. This is considered as an important economic issue and demonstrates the socio-economic statuses of an economy. Unemployment can be caused primarily due to long-term economic downturns such as recessions or depressions. The lower rate of unemployment is the ideal status for an economy and depicts that the economy is a growing and developing one in the future.
What is Unemployment Rate
The unemployment rate is a calculation which measures the standard of a particular economy. It is the percentage of employable people in a country’s workforce who are over the age of 16 and who have either lost their jobs or have unsuccessfully sought jobs in the last month and are still actively seeking work.
|Unemployment Rate = Number of Unemployed People/ Labor Force|
Total labor force contains all the employed and unemployed people who are willing to work. An individual should satisfy the following requirements to be included in the labor force.
- Age 16 years or above
- Can be an employee or a self-employed
- Can’t be a volunteer
- Not engaged in self-service
There are some people who don’t include to labor force. They are;
- People who are below 16
- Full-time college students
- Discouraged workers
- Disabled people
According to the definition of the Bureau of Labor Statistics (BLS), unemployed persons are persons who are:
- Age 16 years or older but not doing a job
- Are not involved in any employment (self or otherwise)
- Have put specific effort to find a job at any time during last four weeks.
- Able to do a job in last four weeks
We can identify employment and unemployment population according to above details.
Unemployment Rate and Economy
If the unemployment rate is high, it shows that economy is underperforming, or the gross domestic product has fallen and if the unemployment rate is low the economy is expanding. Sometimes unemployment rate can change according to the industry. Expansion of some industries create new employment opportunities. Then the unemployment rate of that industry goes down. Such as that there are few types of unemployment. Those are;
Structural unemployment: occurs when changing markets or new technologies make the skills of certain workers obsolete.
Frictional unemployment: exists due to the normal turnover in the labor market and the time taken to find new jobs.
Cyclical unemployment: occurs when there is not enough aggregate demand in the economy to provide employment for everyone who wants to work.
Employment is the primary source of personal income for many people in the world. It has an impact on the consumer spending, standard of living and overall economic growth. Thus, the unemployment rate is a good indicator to measure the country’s economic condition.
“US Unemployment 1890-2011″ By Peace01234, two points added by myself – File:US Unemployment 1890-2009.gif (Public Domain) via Commons Wikimedia