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Wize AP Macroeconomics Textbook > Unemployment

Labor Force

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Labor Force




Labor Force=  Employed + Unemployed\boxed{\text{Labor\ Force} =\ {\ \text{Employed\ + Unemployed} }}

  • Employment looks at total number of people working part-time, full-time or self employed
  • Unemployment looks at the people that are not working but actively looking for work

Unemployment Rate=  Unemployed  LaborForce \boxed{\text{Unemployment\ Rate} =\ \frac{\ Unemployed\ }{\ Labor Force\ }}

Participation Rate=  Labor Force Working Age Population (Over 15 Years Old)\boxed{\text{Participation\ Rate} =\ \frac{\ Labor\ Force }{\ Working\ Age\ Population\ (Over\ 15\ Years\ Old) }}

Employment Rate=  Employed  LaborForce \boxed{\text{Employment\ Rate} =\ \frac{\ Employed\ }{\ Labor Force\ }}

Employment-Population Ratio=  Employed  Working Age Population (Over 15 Years Old)\boxed{\text{Employment-Population\ Ratio} =\ \frac{\ Employed\ }{\ Working\ Age\ Population\ (Over\ 15\ Years\ Old) }}


Wize Tip
Some professors put employment rate as employed/working age population.

Example: Currently the unemployment rate is 15% and the labor force is 200,000. If 10,000 previously discouraged workers begin seeking work, what would be the new unemployment rate?



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Example: Labor Force and Unemployment


Fill in the missing data:

Employment 19,441,200
Unemployment ______________
Unemployment Rate 7%
Labor force ______________
Labor force participation rate 67.5%
Employment-population ratio ______________


Labor force (LF) = employed + unemployed

Unemployment rate = unemployed / LF

Unemployment rate = (LF - employed) / LF

0.07 = (LF - 19441200) / LF

0.07 LF = LF - 19441200

19441200 = 0.93 LF

LF = 20,904,516

Unemployed = 20904516 - 19441200 = 1463316

Labor force participation rate = LF / working age population

0.675 = 20904516 / working age population

working age population = 20904516 / 0.675 = 30,969,653.

Employment-population ratio = employed / working age population = 19441200 / 30969653 = 0.6278 = 62.78%

Practice: Labor Force and Unemployment

The population of the country X was 765. You are given the following:

Population under 15 years of age: 146

Unemployed: 94
Adults not in the labour force: 142

Part-time workers looking for full-time jobs: 24

(i) The labour force is

(ii) The unemployment rate is

(iii) Suppose 12 of the 24 part-time workers looking for full-time jobs are going back to school full-time. The new unemployment rate is

Practice: Labor Force

Suppose that in the economy of Spock, everyone is above the age of 15. Of these people, 100 have jobs, 15 are not working but are looking for work, and 10 do not work or seek work. The unemployment rate is ___ and working age population is _____.

Practice: Unemployment Rate

If employment in one country was 14 million and unemployment was 2 million, the unemployment rate would be