Calculating the Unemployment Rate
Calculating the Unemployment Rate
This figure shows the three-way division of the over-16 adult population. In February 2015, about 62.8% of the adult population was "in the labor force"; that is, people are either employed or without a job but looking for work. Those in the labor force can be divided into the employed and the unemployed. These values are also shown in this table. The unemployment rate is not the percentage of the total adult population without jobs, but rather the percentage of adults who are in the labor force but who do not have jobs:
\(\begin{array}{rcl}\text{Unemployment rate}& =& \cfrac{\text{Unemployed people}}{\text{Total labor force}}\end{array}×100\)
Employed, Unemployed, and Out of the Labor Force Distribution of Adult Population (age 16 and older), February 2015
The total adult, working-age population in February 2015 was 249.9 million. Out of this total population, 148.3 were classified as employed, and 8.7 million were classified as unemployed. The remaining 92.9 were classified as out of the labor force. As you will learn, however, this seemingly simple chart does not tell the whole story.
U.S. Employment and Unemployment, February 2015(Source: http://www.bls.gov/news.release/empsit.t01.htm)
| Total adult population over the age of 16 | 249.9 million |
| In the labor force | 157 million (62.8%) |
| Employed | 148.3 million |
| Unemployed | 8.7 million |
| Out of the labor force | 92.9 million (37.2%) |
In this example, the unemployment rate can be calculated as 8.7 million unemployed people divided by 157 million people in the labor force, which works out to a 5.5% rate of unemployment. The following Work It Out feature will walk you through the steps of this calculation.
Calculating Labor Force Percentages
So how do economists arrive at the percentages in and out of the labor force and the unemployment rate? We will use the values in this table to illustrate the steps.
To determine the percentage in the labor force:
Step 1. Divide the number of people in the labor force (157 million) by the total adult (working-age) population (249.9 million).
Step 2. Multiply by 100 to obtain the percentage.
\(\begin{array}{rcl}\text{Percentage in the labor force}& =& \cfrac{157}{249.9}\\ & =& 0.6282\\ & =& 62.8\%\end{array}\)
To determine the percentage out of the labor force:
Step 1. Divide the number of people out the labor force (92.9 million) by the total adult (working-age) population (249.9 million).
Step 2. Multiply by 100 to obtain the percentage.
\(\begin{array}{rcl}\text{Percentage in the labor force}& =& \cfrac{92.9}{249.9}\\ & =& 0.3717\\ & =& 37.2\%\end{array}\)
To determine the unemployment rate:
Step 1. Divide the number of unemployed people (8.7 million) by the total labor force (157 million).
Step 2. Multiply by 100 to obtain the rate.
\(\begin{array}{rcl}\text{Unemployment rate}& =& \cfrac{8.7}{157}\\ & =& 0.0554\\ & =& 5.5\%\end{array}\)
This lesson is part of:
Unemployment