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Understanding the Unemployment Rate

Discussion in 'Alley of Lingering Sighs' started by Aldeth the Foppish Idiot, Nov 2, 2012.

  1. Aldeth the Foppish Idiot

    Aldeth the Foppish Idiot Armed with My Mallet O' Thinking Veteran

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    Remove all ads!
    This would initially appear to be a pretty simply concept. The unemployment rate is a percentage representing the number of people between the ages of 16 and 65 who are actively seeking work but currently are not working. Because the US adds over 1.5 million people to the workforce each year, you need to job growth of 125,000 - 140,000 jobs per month just to keep up with population growth. So it's possible for there to be new jobs, but if that number is less than the rate of growth of population, the unemployment rate can go up.

    Here's what doesn't make sense and what I don't understand: It's possible (like the jobs report that was just released today), to get a number that one would assume would cause the unemployment rate to go down (175,000 jobs added last month) that instead causes the rate to go up (from 7.8% to 7.9%). Similarly, it's also possible for the reverse to happen: tepid job growth but the unemployment rate drops. What gives?

    I cannot think that there would be anything peculiar about October where a greater number than average people enter the workforce (as opposed to the spirng when a lot of graduates are leaving school and entering the workforce). So how can you get a "good" number but have the unemployment rate go up a little bit?
     
    Aldeth the Foppish Idiot, Nov 2, 2012
    #1
  2. Blackthorne TA

    Blackthorne TA Master in his Own Mind Staff Member ★ SPS Account Holder Adored Veteran Pillars of Eternity SP Immortalizer (for helping immortalize Sorcerer's Place in the game!) New Server Contributor [2012] (for helping Sorcerer's Place lease a new, more powerful server!) Torment: Tides of Numenera SP Immortalizer (for helping immortalize Sorcerer's Place in the game!)

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    Because of the "seeking work", rather than "desiring work" part. If there are no jobs many people drop out of the "seeking work" category; when jobs come back, so do they. Which is why the unemployment rate is a pretty useless statistic if you are looking for accuracy.
     
    Blackthorne TA, Nov 2, 2012
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    Blades of Vanatar likes this.
  3. Blades of Vanatar

    Blades of Vanatar Vanatar will rise again Adored Veteran Pillars of Eternity SP Immortalizer (for helping immortalize Sorcerer's Place in the game!)

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    Exactamundo BTA.

    Aldeth,

    Your question is surprising, coming from you that is. I would of figured you to know this already. I am pretty sure it was my Freshman year of college that was taught, I believe in Macro-Eco. Now, when Unemployment percentages are brought to the table at say, election time, they are bogus.
     
    Last edited: Nov 2, 2012
    Blades of Vanatar, Nov 2, 2012
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  4. Aldeth the Foppish Idiot

    Aldeth the Foppish Idiot Armed with My Mallet O' Thinking Veteran

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    Thanks. I never took a course in economics of any kind. I was a chemistry major.
     
    Aldeth the Foppish Idiot, Nov 2, 2012
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  5. dmc

    dmc Speak softly and carry a big briefcase Staff Member Distinguished Member ★ SPS Account Holder Resourceful Adored Veteran New Server Contributor [2012] (for helping Sorcerer's Place lease a new, more powerful server!)

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    Also, don't forget that in October, seasonal work positions are beginning to be created (generally for holiday retail work), but are often filled by people who are not already in the unemployed category (either because they are not actively looking after losing the last job [if all they do is seasonal work] or because they were not previously employed).
     
    dmc, Nov 2, 2012
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  6. aaa27aaa Gems: 2/31
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    The unemployment rate is pretty useless as an economic indicator if it does not count those that have stopped looking for work, those 'underemployed', and does include those working part-time but looking for full-time work.
     
    aaa27aaa, Nov 8, 2012
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