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

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