Question

Use the following data to work Problems 3 and 4 In October 2009 , the U.S. unemployment rate was 10.0 percent. In October 2011 , the unemployment rate was 8.9 percent. Predict what happened to Unemployment between October 2009 and October 2011 , if the labor force was constant.

Short answer

Unemployment decreased by 1.1% between October 2009 and October 2011.

Step-by-step solution

- Understanding the Problem

Identify the given data: the unemployment rate in October 2009 is 10.0%, and in October 2011, it is 8.9%. Assume the labor force remained constant during this period.

- Define Unemployment Rate

Unemployment rate is the percentage of unemployed individuals in the labor force. It can be defined by the formula: \[ \text{Unemployment Rate} = \frac{\text{Number of Unemployed}}{\text{Labor Force}} \times 100 \text{ percent} \]

- Calculate the Change in Unemployment Rate

Subtract the unemployment rate in October 2011 from the unemployment rate in October 2009: \[ 10.0\text{ percent} - 8.9\text{ percent} = 1.1\text{ percent} \] This indicates a decrease of 1.1% in the unemployment rate.

- Interpret the Result

Since the unemployment rate decreased by 1.1% and the labor force remained constant, there was a reduction in the number of unemployed individuals between October 2009 and October 2011.

Key concepts

unemployment rate

The unemployment rate is a crucial economic indicator. It represents the percentage of people who are actively looking for work but are not currently employed. To calculate this rate, use the formula:
\[ \text{Unemployment Rate} = \frac{\text{Number of Unemployed}}{\text{Labor Force}} \times 100 \text{ percent} \]
For instance, if we know the total labor force and the number of unemployed individuals, we can easily find the unemployment rate by plugging these values into the formula and simplifying the result.
In October 2009, the U.S. unemployment rate was recorded at 10.0%. By October 2011, this rate had dropped to 8.9%. These percentages provide a snapshot of the labor market's health over time.

labor force

The labor force includes all individuals who are either employed or actively seeking employment. It doesn't consider those who are not looking for work, such as retirees or full-time students.
To have an accurate idea of the unemployment rate, one must understand the composition of the labor force. When the labor force is constant, any change in the unemployment rate directly reflects a change in the number of unemployed individuals.
In our example, if the labor force remained constant between October 2009 and October 2011, the decreasing unemployment rate suggests that more people found jobs, reducing the number of unemployed individuals.

economic indicators

Economic indicators are statistics that provide information about the economic performance of a country. They help economists and policymakers understand the current state of the economy and predict future trends.
The unemployment rate is one such economic indicator. It can help gauge the overall health of the economy. High unemployment rates typically indicate economic distress, while lower rates often suggest a healthy, growing economy.
For example, the decline in the U.S. unemployment rate from 10.0% in October 2009 to 8.9% in October 2011 could indicate economic recovery and job growth during that period.

rate of change

The rate of change helps measure how much a certain variable has shifted over a specific period. It is crucial for understanding trends and making predictions.
In the context of our example, the rate of change in the unemployment rate is calculated by subtracting the later value from the earlier one: \[ 10.0\text{ percent} - 8.9\text{ percent} = 1.1\text{ percent} \]
This simple subtraction shows a 1.1% decrease in the unemployment rate over two years.
Understanding the rate of change can help in planning economic policies and interventions. A declining rate may prompt further efforts to sustain economic growth, while an increasing rate might call for measures to address rising unemployment.