DOES THE UNEMPLOYMENT RATE MEASURE WHAT WE WANT IT To
Measuring the amount of unemployment in the economy might seem a straightforward task, but it is not. While it is easy to distinguish between a person with a full-time job and a person who is not working at all, it is much. harder to distinguish between a person who is unemployed and a person who is not in the labor force.
Movements into and out of the labor force are, in fact, common. More than one-third of the unemployed are recent entrants into the labor force. These entrants include young workers looking for their first jobs, such as recent college graduates. They also include, in greater numbers, older workers who had previously left the labor force but have now returned to look for work. Moreover, not all unemployment ends with the job seeker finding a job. Almost half of all spells of unemployment end when the unemployed person leaves the labor force.
Because people move into and out of the labor force so often. statistics on unemployment are difficult to interpret. On the one hand, some of those who report being unemployed fact be trying hard to find a job. They may be calling themselves unemployed because they and to qualify for a government program that financially assists the unemployed or because they arc actually working and paid “under the table.” It may be more realistic to view these individuals as (lilt of the labor. force or, in some cases, employed. On the other hand, some of those who Poultice being out of the labor force may want to work. These individuals may have tried to find a job and may have given up after an unsuccessful search. Such individuals, called discouraged workers, do not show up in unemployment statistics, even though they are truly workers without jobs. Because of these and other problems, the BLS calculates several other measures of labor under utilization, in addition to the official unemployment rate. These alternative measures are presented in Table 2. In the end, it is best to view the official unemployment rate as a useful but imperfect measure of joblessness.