4 Number in millions Employed Adults Unemployed Adults Worki

4. Number (in millions) Employed Adults Unemployed Adults Working Age Population Marginally Attached Workers Discouraged Workers 80 6 137 9 3 Figure 2: Labor Force Characteristics What is the unemployment rate in this economy? What is the labor force participation rate in this economy?

Solution

Labor force (Million) = Employed adults + Unemployed adults = 80 + 6 = 86

(1) Unemployment rate = Unemployed adults / Labor force = 6 million / 86 million = 0.0698 = 6.98%

(2) Labor force participation rate = Labor force / Working age population = 86 million / 137million = 0.6277 = 62.77%

NOTE: Marginally attached and discourged workers are not considered part of labor force.