Defining the Unemployment Rate

Summary

This video script explores the unemployment rate in the United States, highlighting its fluctuations since 1950, with an average of 6%. It delves into the official definition of unemployment, emphasizing the need for active job search within the last four weeks. The script explains the unemployment rate calculation, using historical data to illustrate its significance. It also teases a future discussion on potential undercounting and conspiracies surrounding the unemployment figures.

Takeaways

• 📊 The unemployment rate in the United States has fluctuated since 1950, averaging around 6% per year.
• 📉 The unemployment rate hit a low of under 3% and high points of 10.8% in December 1982 and 10% in October 2009 during economic recessions.
• 📈 Recessions are typically associated with an increase in the unemployment rate, as indicated by the shaded areas on the graph.
• 🔍 The unemployment rate never reaches zero, even in periods of economic growth, due to the dynamic nature of the job market.
• 👷‍♂️ Some firms expand while others shut down, and workers are constantly moving, entering the workforce, or seeking new jobs.
• 🏷️ The official definition of unemployment excludes individuals such as children, prisoners, and retirees, focusing on adults actively looking for work.
• 🔎 To be considered unemployed, a person must be actively seeking employment and have taken steps to find a job within the last four weeks.
• 📈 The unemployment rate is calculated by dividing the number of unemployed people by the total civilian labor force, which includes both employed and unemployed individuals.
• 📅 Historical data shows specific examples, such as February 2015 with 157 million in the labor force and 5.5% unemployment, equating to 8.6 million unemployed people.
• 📚 The script suggests further discussion on the topic in upcoming videos, indicating a series that delves deeper into the nuances of unemployment.
• ❓ The next video will address criticisms and potential undercounting of the unemployment rate, hinting at conspiracy theories or inaccuracies in reporting.

Q & A

What is the average annual unemployment rate in the United States since 1950 according to the script?

The average annual unemployment rate in the United States since 1950 is about 6%.

What were the two highest recorded unemployment rates in the United States mentioned in the script?

The two highest recorded unemployment rates were 10.8% in December of 1982 and 10% in October of 2009.

Why does the unemployment rate increase during recessions?

The unemployment rate increases during recessions because economic downturns often lead to business closures and reduced hiring, resulting in more people out of work.

Why is the unemployment rate never zero, even in a booming economy?

The unemployment rate is never zero because even in a growing economy, there is constant change with some firms expanding and others shutting down, and workers are always moving about, entering the workforce, or looking for new jobs.

What is the official definition of an unemployed person according to the script?

An unemployed person is defined as an adult, non-institutionalized civilian without a job and actively looking for work.

What action must a person take to be considered actively looking for work?

To be considered actively looking for work, a person must have taken some action to find a job in the last four weeks.

How is the unemployment rate calculated?

The unemployment rate is calculated by dividing the number of people who are unemployed by the number of people in the civilian labor force, which includes both the employed and the unemployed.

What were the numbers of the civilian labor force and the unemployment rate in February 2015 according to the script?

In February 2015, there were 157 million people in the labor force, and the unemployment rate was 5.5%.

How many unemployed people were there in January 1978, and what was the unemployment rate at that time?

In January 1978, there were 6.4 million unemployed people, and the unemployment rate was 6.4%.

What is a common criticism of the unemployment rate that will be discussed in the next video according to the script?

A common criticism of the unemployment rate that will be discussed in the next video is whether it is undercounted or if there is a conspiracy to undercount the unemployment rate.

Where can viewers find more videos and resources on this topic?

Viewers can visit MRUniversity.com to see the entire library of videos and resources on this topic.

Outlines

00:00

📊 Unemployment Rate Overview

This paragraph introduces the unemployment rate in the United States, highlighting its fluctuations over time as depicted in a graph from the St. Louis Federal Reserve economic database. It mentions the average annual rate of about 6% since 1950, with notable peaks during economic recessions, such as 10.8% in December 1982 and 10% in October 2009. The script also points out that unemployment never reaches zero, even during economic booms, due to the dynamic nature of the job market with firms expanding and closing, and workers transitioning between jobs.

Keywords

💡Unemployment Rate

The unemployment rate is a crucial economic indicator that measures the percentage of the labor force that is willing and able to work but cannot find employment. In the video, it is depicted through a graph from the St. Louis Federal Reserve economic database, showing fluctuations since 1950. It is central to the video's theme as it provides historical context and trends related to employment and economic health.

💡Recession

A recession is a period of temporary economic decline during which trade and industrial activity are reduced. In the script, it is mentioned that unemployment rates increase during recessions, as indicated by the shaded areas on the graph, with specific examples given for December 1982 and October 2009. This term is integral to understanding the economic conditions that affect employment levels.

💡Civilian Labor Force

The civilian labor force refers to the total number of people who are employed or are unemployed but actively looking for work, excluding the military and other non-civilian sectors. The video explains that the unemployment rate is calculated by dividing the number of unemployed people by the size of the civilian labor force, as illustrated with the example from February 2015.

💡Actively Looking for Work

This phrase describes the criterion for being classified as unemployed according to the official definition. A person must be without a job and have taken some action to find work within the last four weeks. This concept is vital for understanding who is included in the unemployment rate calculations, as exemplified in the script's discussion of the unemployment definition.

💡Non-Institutionalized Civilian

A non-institutionalized civilian is an adult who is not in a military or institutional setting, such as a prison or a long-term care facility. The script clarifies that for unemployment statistics, only non-institutionalized civilians without a job and actively seeking work are considered unemployed, emphasizing the demographic targeted by unemployment measures.

💡Great Recession

The Great Recession refers to a severe and long-lasting economic downturn that occurred roughly between late 2007 and early 2009. The video mentions a high unemployment rate of 10% in October 2009, which is associated with this period. Understanding the Great Recession helps contextualize the impact of significant economic events on unemployment figures.

💡FRED (Federal Reserve Economic Data)

FRED is a database maintained by the St. Louis Federal Reserve that provides a wealth of economic data. In the video, a graph from FRED is used to illustrate the unemployment rate over time. FRED is an essential resource for economists and researchers, and its data is central to the video's presentation of unemployment trends.

💡Economic Database

An economic database is a digital repository that stores and organizes economic data for analysis and research. The script mentions the St. Louis Federal Reserve economic database as the source of the unemployment rate graph, highlighting the importance of such databases in tracking and understanding economic indicators.

💡Boom

An economic boom refers to a period of rapid economic growth and prosperity. The video script points out that even during a boom, the unemployment rate is never zero, indicating that joblessness is a persistent issue even in favorable economic conditions. This term helps to understand the ongoing nature of unemployment regardless of the economic cycle.

💡Practice Questions

Practice questions are exercises designed to test one's understanding of a topic. The video script encourages viewers to engage with practice questions to reinforce their comprehension of the unemployment rate and related concepts. This interactive element is part of the educational approach taken in the video series.

💡Undercounting

Undercounting refers to the situation where a statistic or number is reported as lower than the actual figure. The script hints at a future discussion about potential undercounting of the unemployment rate, suggesting that official figures may not fully capture the extent of joblessness. This concept is relevant to the critique of economic data and its accuracy.

Highlights

The unemployment rate in the United States has been analyzed from a historical perspective since 1950.

The average annual unemployment rate is about 6%, with fluctuations over the years.

There was a unique instance where the unemployment rate fell below 3%.

High unemployment rates were recorded at 10.8% in December 1982 and 10% in October 2009 during recessions.

Unemployment rates increase during economic recessions, indicated by shaded areas on the graph.

The unemployment rate never reaches zero, even in periods of economic boom.

Economic growth involves changes with some firms expanding while others shut down.

Workers are constantly moving, entering the workforce, and seeking new jobs.

Unemployment is officially defined with specific criteria for who is considered unemployed.

A person is only counted as unemployed if they are actively looking for work and have taken action in the last four weeks.

The unemployment rate is calculated by dividing the number of unemployed people by the civilian labor force.

In February 2015, there were 157 million people in the labor force with 5.5% unemployment.

8.6 million people were unemployed in February 2015, representing 5.5% of the labor force.

In January 1978, the labor force was about 100 million with an unemployment rate of 6.4%.

6.4 million people were unemployed in January 1978, aligning with the 6.4% unemployment rate.

A common criticism of the unemployment rate is whether it is undercounted or subject to a conspiracy.

The video encourages viewers to test their understanding with practice questions or proceed to the next video.

Additional resources and videos are available on MRUniversity.com.

Transcripts

♪ [music] ♪

[Alex] Let's begin today by taking a look

at the unemployment rate in the United States.

If we Google "unemployment rate United States FRED,"

we'll get this graph

from the St. Louis Federal Reserve economic database.

We can see from the graph that the unemployment rate fluctuates.

Since 1950, it's averaged about 6% per year,

but it dipped below 3% once,

and it had highs of 10.8% in December of 1982,

and almost as high, 10%, in October of 2009,

the Great Recession.

Not surprisingly,

the unemployment rate increases during recessions,

and those are shown by the shaded areas.

Perhaps a little bit more surprisingly,

the unemployment rate is never zero.

Not even in a boom.

In a growing economy, lots of things are changing.

And even as some firms are expanding,

others are shutting down.

Workers -- they're moving about, they're entering the work force,

they're looking for new jobs and so forth.

We'll talk more about that in an upcoming video.

Now let's look at how unemployment is defined.

A person with a job is employed.

But in the official definition,

not everyone without a job is unemployed.

Is a six-year-old unemployed?

Is a prisoner unemployed?

What about a retiree?

In each of these cases, the official answer is no.

A person is counted as unemployed only if they're an adult,

non-institutionalized civilian without a job,

and actively looking for work.

The most important part of this definition

is that to be considered unemployed,

a person must be out of a job, but actively looking for work.

And that means that they must have taken some action

to find a job in the last four weeks.

The unemployment rate is the number of people who are unemployed

divided by the number of people in the civilian labor force --

the employed plus the unemployed.

Let's add the civilian labor force

and the number of unemployed people to our graph

to see all of these relationships, and get an idea of the magnitudes.

We can see, for example, that in February of 2015,

there were 157 million people in the labor force.

Of these, 5.5% were unemployed,

which means that there were 8.6 million unemployed people.

Now in case you don't want to check those calculations,

let's make it easy.

Let's go to January of 1978.

At that time there were about 100 million people

in the labor force.

The unemployment rate was 6.4%,

and there were 6.4 million people unemployed, just as expected.

In the next video, we're going to look

at a common criticism of the unemployment rate:

Is unemployment undercounted?

Is there a conspiracy to undercount the unemployment rate?

[Narrator] If you want to test yourself,

click “Practice Questions.”

Or, if you're ready to move on,

you can click “Go to the Next Video.”

You can also visit MRUniversity.com

to see our entire library of videos and resources.