More On The Unemployment Rate

More On The Unemployment Rate - • How can you tell...

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More On The Unemployment Rate Why does the unemployment rate fall? Example: o Suppose the labour force had 100 people in it and 7 of those people were unemployed. o The unemployment rate= 7/100=7% o One of these unemployed persons quite looking for a job o The number of unemployed= 6 and the labour force beomes 99 o The new unemployment rate = 6/99= 6.06% o This shows that the unemployment rate will fall if unemployed people quit looking for a job when the rate drops for this reason, it is bad for the economy. o The economy is so weak that the unemployed stop looking for work. Therefore the unemployment rate will fall in the middle of a serious recession because people give up actively looking for jobs.
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Unformatted text preview: • How can you tell whether a falling unemployment rate Is good or bad? o If the unemployment rate falls and the size of the labour force falls as well, the economy is not improving o If the unemployment rate falls and the labour force does not fall, the economy is getting weaker o The unemployment rate is an inverse indicator o If given just the the employment rate and asked about the wellbeing of the economy, make reference to the assumptions and requiring the size of the labour force as well. o In general, a rising unemployment rate is bad news and a falling unemployment rate is good news...
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This note was uploaded on 02/05/2011 for the course ECON 011 taught by Professor Yezer during the Fall '07 term at GWU.

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