Determine the impact on each of the following if 2 million formerly unemployed workers decide to return to school full time and stop looking for work: What will happen to the rates? Will they increase? Will they decrease ? or will they stay the same ?
The labor force participation rate drops since these workers have left the labor force.
The size of the labor force drops by 2 million.
The unemployment rate drops since the percentage drop in the number of unemployed is greater than the percentage drop in the labor force.
If 2 million formerly unemployed workers decide to return to school full time and stop looking for work, then the labour force participation rate, given as the number of people in labour force divided by the total population eligible to work, falls and the labour force also falls by 2 million.
However, the unemployment rate (U = unemployed/ labour force) may or may not fall. This is because although 2 million people fall out of the number of people unemployed, but they also fall out of the labour force.
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