Computation of unemployment rate

According to Gwartney et al. nearly 59.7 percent of the US population were unemployed in 2009, with men having a higher proportion (Gwartney et al.175). The Bureau of Labor Statistics in the United States maintains a study of households to ascertain the number of participants who are working, disabled, or in other labor force categories. When calculating the unemployment rate, one is judged not only on whether or not they are employed, but also on whether or not they have the opportunity to work and are actively looking for work. (175) Gwartney et al. In the United States, someone with the ability to act is considered a member of the civilian community. These private citizens, Bureau Labor of Statistics classify them as non-institutionalized population. However, the population of people aged sixteen and over is categorized as institutionalized civilian population.

Part 3, Chapter 8 Gwartney and colleague further states that the institutionalized population is considered employed if they work for payment for at least one hour or work for fifteen hours with no compensation in family corporate(Gwartney et al. 173). Those who have worked though were in short-term vacation due to illness, labor conflict or other personal reasons during the reference week fell in the same group. The full-time workers, for example 35 hours a week or operate at part-time due to economic reasons or other reasons qualified for the category. Unemployed populations are categorized as those with no work, ready to work and are seeking for job opportunities (De la Fuente 2). The institutionalized population can further include the hospitalized, those in jails, incapacitated and armed workforce

The non-institutionalized populations are further classified as either civilian workforce or out of the workforce. The people in out of labor force are grouped as those with no job and not looking for jobs, individuals under sixteen years (Gwartney et al. 174). Those in the military, family caregivers, mentally disabled and homeless also fall into the category of not in workforce population. The retired, students and satisfied people are examples of those not in labor force. The civilian workforce entails of all the working and jobless personnel. Individual only qualifies to be an unemployed civilian if they have the ability to work, willing to work, and they are seeking for a job (Gwartney et al. 174). Some of the people considered private citizens, but unemployed are; job losers, those voluntary left jobs and still seeking for work, and those who had no previous work experience.

The unemployed population who are willing and actively seeking for jobs may apply different methodologies as clearly stated by Gwartney et al., in part 3 chapter 8. Some of the ways involve responding to internet job advertisements, sending job application letters, meeting with potential employers, attending work interviews. Registration at potential employment offices, joining empowering organizations, and keeping contact with family and associates can also be of help when looking for jobs. However, looking for work is quite complicated it does not relate to the grouping of people in labor force (Gwartney et al. 174). Some of the unemployed civilians receive transfer cash payment from tax payment by employers to governmental offices. Those classified as unemployed by Bureau Labor of Statistic do not involve those who receive the payment from the agencies

Types of unemployment

Unfavorable working conditions, unproductive rules and regulations, lack of workers motivation, and disagreement between the employee and employer attributes to high unemployment rates. To clarify on unemployment, economists group unemployment into three forms; structural, frictional, and cyclical unemployment (Gwartney et al. 176). Unemployment may occur when changes happen in the economy leading to demand in particular abilities and skills from workers which the current workers may be lacking, therefore, leading to their loss of the job. This form of unemployment is known as structural. Structural employment mostly occurs when employees skills and abilities unneeded get replaced by machines (Bergem 3). This type of unemployment can also be caused by the drive for new product development which may involve a lot of technological application and also public-sector shifts (Gwartney et al., 177). A good example of structural unemployment is the elimination of traveling of businesspeople due to technological advancement in marketing such as online marketing, and customers call center use and social media interaction.

Constant changes in workforce characterize the frictional form of unemployment. This kind of unemployment occurs when one have to seek for new jobs and leave their current jobs, looking for employment for the first time or seeking job during the base period (Bergem 3). Frictional unemployment may occur due to the failure of employers being aware of a worker qualification and availability and also failure of informing job seekers of available jobs. It can therefore clearly be indicated that this type of unemployment is caused by inadequate information (Gwartney et al. 177). An example of frictional unemployment is an employer seeking to hire a new worker. The company will not employ the first applicant as they need to do an evaluation to find the best employee. They fear to hire unqualified workers as it will be costly to train them. Therefore, the process results in an expenditure of a lot of time and resources.

However the job search has side effects, the internet has solutions. The internet has made it easy for both the employer and job seeker to communicate about their needs. Most managers display job vacancies on the web accompanied by workers qualifications required, and this helps the employee to send an application to the employer (Gwartney et al. 177). The job search through internet reduces the cost and time spent on looking for a viable worker. This internet job search will contribute to reducing frictional employment. Though, increase in rejection of job opportunities by job seekers will increase unemployment rates.

The decrease in goods and services leads to increase in cyclical unemployment. When demand for products reduces, the production also reduces, and this will result in the reduction in the number of workers. When a decrease in demand happens, poor understanding occurs among worker (Bergem 3). Employees fail to understand whether their employment will lead to short-term or long-term unemployment. Most employers lay off workers and when the demand escalates some of the employers will go for new workers (Gwartney et al.179). An example is the downturn of consumers. When sell in vehicles reduces due to pull back on purchasing vehicles, the manufacturer will most likely lay off laborers.

Unemployment rate calculation

The rate of unemployment is the proportion of unemployed people. It is important to compute unemployment rate as it is important in labor force analysis. Bureau Labor of Statistics states that computing unemployment rate mathematically equal to dividing the total of jobless by the number of persons in the workforce. The number of workforces is calculated by adding the number of working population and the number of unemployed people (Gwartney et al. 175). If 4,500,000 individual are unemployed during a reference week and the number of personnel in the workforce is 100, 000, 000 then the unemployment rate would be 4.5%.

Relationship between actual unemployment rate and full employment. Real unemployment rate involves the underemployed, discouraged, and marginally attached workers; it is always double the level of unemployment (Gwartney et al. 81). Full employment, on the other hand, is the standard unemployment rate which occurs when labor supply equals demand. Therefore if the real unemployment rate is high, full employment decreases and economy equilibrium reduces. When the actual rate is low then full employment is considered normal.

Conclusion

In computing unemployment rate, the economist should understand different categories of civilian population. The lead economist should clearly understand the population that falls in the group of unemployed. Understanding actual rate and full employment and how the two relate to each other. This knowledge will help in understanding economy equilibrium of a country.

Work cited

Macpherson, David. Macroeconomics: Private and Public Choice. Nelson Education, 2012. Print.

Bergem, Kyle Calculating the Unemployment Rate. Award Winning Lessons-Secondary, Pine River, June 2014. http://mcee.umn.edu/sites/mcee.umn.edu/files/20143msecondary2ndplace-kbergem.pdf 14th may 2017 .

De la Fuente, Arturo. “New measures of labour market attachment.” Statistics in Focus 57 (2011): 2011. Print.