Question

The noninstitutional adult civilian population is 120 million, the number of unemployed persons is 5 million, and the number of employed persons is 60 million. What is the unemployment rate?

Short answer

The unemployment rate is approximately 7.69%.

Step-by-step solution

Calculate the Total Labor Force

To calculate the total labor force, add the number of employed persons and the number of unemployed persons. In this case, that would be 60 million (employed) and 5 million (unemployed), which equals to 65 million.

Compute Unemployment Rate

Once the labor force is calculated, the unemployment rate can be calculated by dividing the number of unemployed by the total labor force and then multiplying by 100, to turn it into percentage form. Therefore, the formula to determine the rate is \(\frac{Number~of~unemployed~persons}{Total~labor~force} \times 100\). Here, it would be \(\frac{5~million}{65~million} \times 100\), which yields approximately 7.69%.

Key concepts

Total Labor Force

Understanding the total labor force is crucial for interpreting various economic indicators. When we reference the 'total labor force', we're talking about the segment of the population that is either currently employed or actively seeking employment. This excludes people who are not looking for work, such as retirees, students solely dedicated to their studies, and others not actively participating in job seeking, due to various reasons.

For a straightforward example, let's look at a simplified scenario: a noninstitutional adult civilian population consisting of 120 million individuals. Out of this number, imagine we have 60 million employed persons and 5 million unemployed persons. To calculate the total labor force, we would combine the number of employed persons with the number of unemployed persons. Thus, the total labor force equals 65 million. It's an intuitive process that's the cornerstone for further labor market analysis.

Unemployment Rate Formula

The unemployment rate serves as a key indicator of economic health, providing insight into labor market conditions. To calculate this rate, we employ a specific formula:

\[\begin{equation}Unemployment~Rate~(\%) = \left( \frac{Number~of~unemployed~persons}{Total~labor~force} \right) \times 100\end{equation}\]

This formula generates a percentage that reflects the proportion of the labor force currently without work but willing to work and actively seeking employment. Echoing our previous example with a total labor force of 65 million and 5 million unemployed persons, we would calculate the unemployment rate as follows: \[\begin{equation}\frac{5~million}{65~million} \times 100 \end{equation}\]which gives us an unemployment rate of approximately 7.69%. This percentage is more than just a number—it sheds light on the level of unemployment within an economy and provides a snapshot that can influence economic policy and individual career decisions.

Employment Statistics

Employment statistics are a collection of data points that provide insights into the state of the job market—information such as the number of people employed, the types of jobs they hold, the average earnings, hours worked, and of course, the unemployment rate. Because employment is such a fundamental aspect of economic health, these statistics are closely monitored by governments, businesses, and economists.

These statistics help identify trends and can signal shifts in the economy. They're used in decision-making processes, from Federal Reserve interest rate adjustments to workforce development initiatives. The ability to interpret employment statistics correctly is a valuable skill, as it helps individuals understand the wider economic context of their own employment situation and allows policy makers to craft informed economic strategies.