What is the 'real' unemployment rate?

Summary

The video explains how the U.S. government measures unemployment rates and clarifies the distinction between official unemployment and the so-called 'real' unemployment rate. It outlines how people are counted as unemployed if they are jobless, able to work, and have actively searched for a job within the last four weeks. The 'real' unemployment rate includes discouraged workers, marginally attached workers, and part-time workers who want full-time work. It also discusses the labor force participation rate, which includes students, stay-at-home parents, and retirees, further distinguishing this from true unemployment figures.

Takeaways

• 👷 Joe is considered unemployed because he lost his job and has been looking for work in the last four weeks.
• 💇 Steve is part-time at a barber shop, but his employment status isn't detailed in the script.
• 🏆 Jane, a former doctor, is not considered unemployed because she doesn't want a job after winning the lottery.
• 📊 The government's unemployment rate is calculated based on the percentage of unemployed individuals in the total labor force.
• 🔍 The total labor force is the sum of unemployed individuals and those who are employed.
• 🤔 The 'real' unemployment rate includes underemployment, discouraged workers, marginally attached workers, and part-time workers wanting full-time work.
• 📉 When the economy struggles, both unemployment and underemployment rates increase.
• 📈 When the economy improves, both rates decrease, reflecting a correlation between economic health and employment.
• 🧮 Some argue that the real unemployment rate is higher, using the labor force participation rate, which includes students, retirees, and others not in the labor force.
• 🏛 The government's unemployment rate is a specific measure and does not include those not actively seeking employment.

Q & A

What is the government's definition of being unemployed?

The government considers someone unemployed if they are not working, are available to work, and have actively looked for a job in the past four weeks.

How is the official unemployment rate calculated?

The official unemployment rate is the percentage of unemployed people (those not working but actively seeking work) divided by the total labor force, which includes both employed and unemployed individuals.

Who is included in the labor force?

The labor force includes both the employed and the unemployed, defined as those who are either working or are actively looking for work.

Is Jane, the lottery winner, considered unemployed?

No, Jane is not considered unemployed because she is not actively looking for work, even though she is not working.

What is the underemployment rate?

The underemployment rate includes the unemployed, discouraged workers (who have stopped looking for a job), marginally attached workers (who have looked for work in the past year but not in the last month), and part-time workers who want full-time jobs.

How does the underemployment rate differ from the unemployment rate?

The underemployment rate is broader because it includes discouraged workers, marginally attached workers, and part-time workers seeking full-time jobs, whereas the unemployment rate only counts those actively seeking work in the last four weeks.

What do people mean by 'real' unemployment rate?

Some people refer to the 'real' unemployment rate as a higher number than the official one, often including underemployment and discouraged workers who have given up looking for work.

What is the labor force participation rate?

The labor force participation rate measures the percentage of people over the age of 16 who are either working or actively seeking work, compared to the total population of people in that age group.

Why is the labor force participation rate different from the unemployment rate?

The labor force participation rate includes a broader group of people, such as full-time students, stay-at-home parents, retirees, and people like Jane, the lottery winner, who are not working or seeking work, while the unemployment rate only counts those who are actively looking for work.

Why might some claim that the real unemployment rate is as high as 40%?

Some might confuse the labor force participation rate with unemployment, which leads to an inflated number. The 40% includes people who are not working but also aren't looking for work, such as students, retirees, and stay-at-home parents.