Question

1. Measuring employment, unemployment, and labor force participation

Consider a small economy composed of six people: Hubert, Kate, Manuel, Poornima, Valerie, and Shen. Each person's employment status is described in the following table.

Based on the criteria used by the Bureau of Labor Statistics (BLS), identify each person’s status as employed, unemployed, “not in the labor force” (if not in the civilian labor force but still part of the adult population), or “not in the adult population” if not in the civilian adult population.

Person	Status
Hubert is a 21-year-old professional tennis player. When he's not competing, he works as a coach at a local tennis club.	Employed
Kate is a 42-year-old autoworker who was just laid off by her employer. She is trying to find any kind of job to help make ends meet.	Unemployed
Manuel is a 45-year-old accountant who has been out of work for almost a year. He became so discouraged that he gave up on his job search a couple of months ago.
Valerie is a 29-year-old who lost her job as an associate producer for a radio station. After spending a few weeks out of work and interviewing for several other positions, she gave up on her job search and decided to go back to grad school. She made that decision a few months ago.
Shen is a famous novelist. He is spending the summer at his lake house in upstate New York, doing a little writing each day but mostly spending his time gardening and reading.
Poornima is a 13-year-old student at East Valley Middle School. She babysits her younger brother and does other chores, so her parents give her an allowance of $20 per week.

Complete the right half of the following equation to reflect the labor force participation rate reported by the BLS.

Labor Force Participation RateLabor Force Participation Rate

=  =

According to this formula, what is the labor force participation rate of this economy of six people?

33.33%

40%

50%

60%

Complete the right half of the following equation to reflect the unemployment rate reported by the BLS.

Unemployment RateUnemployment Rate

=  =

According to this formula, what is the unemployment rate of this economy of six people?

33.33%

40%

50%

60%

Answer 1

Hubert: Employed

Kate: Unemployed

Manuel: not in the labor force

Valerie: not in the labor force

Shen: Employed

Poornima: not in the adult population

Labor Force Participation Rate = [Number in Labor force / Adult population] * 100

Labor force =  Employed + Unemployed

Adult population = Employed + Unemployed + not in the labor force

Here Labor force= 2+1 = 3

Adult population = 2+1+2 = 5

labor force participation rate = 3/5 * 100 = 60%

Unemployment Rate = Unemployed workers/Labor Force * 100

Here Unemployed = 1

Unemployment Rate = 1/3 * 100 = 33.33%