Question

1. Table 1 below shows the labour statistics collected by the National Office for Statistics in a country in 2017.

Table 1: Labour Statistics

Total Population	Adult Population	Number of Unemployed	Number of Employed
195.4	139.7	5.7	92.3
Numbers are in Millions.

1. Based on these statistics, calculate the unemployment rate and the labour force participation rate in 2017. Show your work to justify your answer.

2. If the number of discouraged workers increases by 1 Million, show the effect on the unemployment rate.

2. Identify which type of unemployment each of the following is likely to experience:

1. A construction worker is laid off during a recession

2. A student graduates from university and searches for a job

3. A factory worker is replaced by a machine and laid off

Answer 1

Unemployment rate = Unemployed / Labor force = 5.7 * 100 / (5.7 + 92.3) = 5.816%

Labour force participation rate = Labor force / Adult population = (5.7 + 92.3) * 100 / 139.7 = 70.15%

If the number of discouraged workers increases by 1 million, this will reduce the unemployed workers and labor force by 1 million as those discouraged are the ones who were previously unemployed and looking for jobs.

Unemployment rate = 4.7 * 100 / (4.7 + 92.3) = 4.845%

• A construction worker is laid off during a recession: Cyclical unemployment because the unemployment is the result of the business cycle of recession.
• A student graduates from university and searches for a job: Frictional unemployment because he is still searching for job
• A factory worker is replaced by a machine and laid off: Structural unemployment since the worker is displaced due to structural changes in the economy.