What this lesson teaches
I can read real GDP, GNI, per-capita figures, unemployment rate, CPI, balance of trade, HDI and the Gini coefficient.
Syllabus 9570, 3.2.1(c). Standard of Living and Macroeconomics Indicators: Macroeconomic indicators; Indicators of economic performance include real Gross Domestic Product (GDP) or Gross National Income (GNI), real GDP or GNI per capita, unemployment rate, Consumer Price Index (CPI) and balance of trade; Human Development Index (HDI) as an indicator to reflect standard of living; Gini coefficient as an indicator to reflect income distribution
Make a guess
The unemployment rate falls from 10% to 5%, but no one has found a new job. How is that possible?
- Some jobless people stopped looking for work.
- Some workers retired, which created new jobs.
- The government counted the numbers wrongly.
Show the answer
Some jobless people stopped looking for work.
People who stop looking leave the labour force. Fewer are counted as unemployed, so the rate falls without anyone being hired.
The unemployment rate is the share of the labour force that is jobless and looking for work.
The labour force is everyone who is working or actively looking for work. The unemployment rate is the number unemployed divided by the labour force.
People who are not working and not looking, such as full-time students, retirees and discouraged workers who have given up, are outside the labour force.
So the unemployment rate can fall without anyone finding a job, if unemployed people stop looking.
To judge the job market properly, also look at the number employed, the employment rate and whether people are working fewer hours than they want (underemployment).
- Rate
- Unemployed / labour force.
- Labour force
- Employed + unemployed (looking for work).
Worked example: A fall without new jobs
90 people are employed and 10 unemployed. Later, 90 are still employed, but 5 of the unemployed give up looking.
- Before: 10 / 100 = 10% unemployment.
- After: 5 / 95 = about 5.3%.
- The rate fell, but no one found work.
- The job market has not improved; some people have simply left the labour force.
Watch out for this
A fall in the unemployment rate always means more people have jobs.
It can also fall because unemployed people stop looking for work and leave the labour force.
Check your understanding
Who is counted as unemployed?
- A full-time student who would like a part-time job someday.
- Someone without a job who is actively looking for work.
- A retiree who has no job and receives no wage.
Show the answer
Someone without a job who is actively looking for work.
Right. They must be available and searching.