Question

Suppose you see the unemployment rate rising and the labor force participation rate falling. Which of the following could, on its own, explain this data?

		A.  employed workers are retiring early.
		B.  unemployed workers are retiring early.
		C.  retired workers leave retirement to look for a job.
		D.  More children reach adulthood, but do not get a job or look for one.
		E.  retired workers leave retirement and are immediately employed.

Answer 1

option A
employed workers are retiring early

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the formulas are::

Unemployment rate =(unemployed/labor force)*100
the labor force participation rate=(labor force/working-age population)*100

Labor force =employed + unemployed

so to decrease both rates the unemployed should stay the same and labor force should decrease which is possible if the employed workers are retiring early

as the unemployed stay the same so the unemployment rate increases

the labor force is decreasing but the working-age population is same so the labor force participation rate is decreasing.