The Urgency of Now for the Unemployed

June 17, 2013

The U.S. Bureau of Labor Statistics reported that the unemployment rate increased slightly from 7.5% to 7.6% in May. Each month, comments on this number include a discussion on “labor force participation"—the number that is released is based on people who are “in the labor force.” To be included in the labor force, someone has to either be employed, or actively looking for work. People who are retired, full-time students, homemakers or caregivers and do not work for wages are considered “not in the labor force.” But, people who have given up active labor market search also are considered “not in the labor force.” So, for that reason, some people who may be unemployed this month can drop out of the numbers altogether because the next month they may have given up any hope of finding a job and move into the “not in the labor force” category. Since the unemployment rate is a fraction, when someone moves from unemployed to “not in the labor force,” it means the numerator of the unemployment rate falls by one, but the denominator, which counts everyone in the labor force, also goes down by one. The net result is that the fraction gets smaller, even though no one found a job in this example.n gets smaller, even though no one found a job in this example.

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