Question

Under what condition would a decrease in

unemployment be bad for the economy?

Short answer

Unemployment rate depicts percentage of individuals unemployed in total labor force

Step-by-step solution

Step 1. Unemployed people

Unemployed people: People who are looking for job but are not able to find it.

Step 2. Discouraged workers

those workers who are eligible for jobs but have they have stopped looking for job because they might not find suitable options they are looking for.

Step 3. Reason

Increase in unemployment does not always means country is not doing good. Discouraged workers are not considered as unemployed nor they are included in labor force.

So, if these discouraged workers join the labor force again and start looking for work it would contribute to increased unemployment. But this increase would not be a bad sign for the economy.