The civilian labor force is defined as those who have jobs or are seeking a job, are at least 16 years old and are not serving in the military. A person who does not have a job, is available for work and is actively seeking work is considered to be unemployed.

Key labor market indicators include:

  • The Labor Force Participation Rate - This rate is calculated by dividing the number of people in the civilian labor force by the total civilian population of those 16 years old or older.
  • The Unemployment Rate - This is computed by dividing the number of unemployed by the number of people in the civilian labor force. That number is multiplied by 100 and expressed as a percentage. Part-time workers are considered to be employed.
  • The Employment/Population Ratio - This ratio is calculated by dividing the number of job-holding civilians who are at least 16 years old by the total number of people in the civilian population within the same age group. This ratio will tend to go higher during economic booms and lower during recessions.

There are several issues with calculating the unemployment rate. The handling of discouraged workers is one point of contention. This phrase describes workers who are without a job but are not actively seeking a job because they have gotten discouraged about their job search. Such people would not be officially counted as unemployed, although this is a point of contention. Another area of dispute has to do with the inclusion of part-time workers as employed. Some believe that they should not be counted as employed, especially those who would prefer to work full-time. Due to definitional disputes with the unemployment rate, many economists prefer to use the employment/population ratio, which uses numbers that are easily measured and are well defined.

Generally unemployment is higher during a recession. Employment usually does not pick up until after the economy is coming out of a recession; it is usually regarded as a "lagging indicator" for the health of the economy.

GDP, Real Wages and Aggregate Hours Worked
We cannot simply look at the number of people with jobs when examining the total quantity of labor in an economy. Some workers only have part-time jobs, while others work more than the standard work-week. Aggregate hours, which is the total number of hours worked by all employees, is a better measure of the quantity of labor.

The number of aggregate hours worked should increase with GDP. Data pertaining to aggregate hours in the United States is maintained by the U.S. Department of Labor Bureau of Labor Statistics.

Changes in real wage rates can be calculate by dividing nominal wages by the GDP deflator. Data for real wages in the United States is also maintained by the Bureau of Labor Statistics.

Types of Unemployment

Related Articles
  1. Personal Finance

    U.S. Labor Participation Rate at Record Lows

    In absolute terms, labor participation hit an all-time low.
  2. Financial Advisor

    How Labor Force Participation Rate Affects U.S. Unemployment

    While a falling unemployment rate sounds like a good thing, it can actually be indicative of people leaving the labor force because they can't find a job.
  3. Investing

    Explaining the Participation Rate

    The participation rate is the percentage of civilians who are either employed or unemployed and looking for a job.
  4. Personal Finance

    Where Unemployment Hits Hardest

    A look at the demographics of unemployment, and what that means for workers around the nation.
  5. Personal Finance

    What The Unemployment Rate Doesn't Tell Us

    The unemployment rate is climbing, but what does it mean?
  6. Personal Finance

    America’s Labor Market: Hidden Distortions and Uncertain Forecasts

    Employment reports released by the Bureau of Labor Statistics have a profound impact on political, business, consumer, and investor behavior.
  7. Personal Finance

    What "Unemployment" Really Means

    Unemployment occurs when a person who is actively searching for employment is unable to find work. The most frequently cited measure of unemployment is the unemployment rate. This is the number ...
  8. Insights

    Are Markets Ready For An Interest Rate Hike?

    Despite financial market fears over the uncertainty of Greece’s debt crisis and the recent drop in China’s stock-market, Federal Reserve Chairwoman Janet Yellen has reaffirmed the Fed’s plans ...
  9. Personal Finance

    Is the Number of Workers in the U.S. Declining?

    The number of workers in the U.S. labor force is declining. What caused it and what is the solution?
  10. Investing

    The Labor Market Recovery’s Missing Ingredient

    Job creation is running at the fastest pace since the 90s, and there is some evidence that wage growth is finally starting to accelerate, albeit modestly.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center