According to the Bureau of Labor Statistics, in June 2010 employment declined by 125,000 workers while at the same time the unemployment rate declined to 9.5%. How is it possible for the unemployment rate to drop when there are fewer people working?
Yes it is possible
Ex.
An economy has
The adult population of 1000
Not in labor force =500
The labor force of 500
Employed of 400
Unemployed of 100
Suppose the employment decreases by 100 but it also decreases labor force by 100 and increases the not in labor force population so the decrease in employment might decreases unemployment
It is possible because decrease in employment means not increase in unemployment only, it can be increased in not in labor force participation which does not affect the unemployment rate but if some of the unemployed got a job and more than 125000 employed lest the labor force then it can reduce the unemployment rate.
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