From the course: Economics for Everyone: Job Markets and the Economy

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Labor force and unemployment

Labor force and unemployment

From the course: Economics for Everyone: Job Markets and the Economy

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Labor force and unemployment

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- Usually the unemployment rate goes down because more people have jobs that were looking for them, and they finally have new gigs. But sometimes the unemployment rate goes down because people give up looking for work and they leave the labor force. And now, because they're no longer in the labor force, they're also no longer counted as unemployed. And the unemployment rate goes down as well. I know this sounds like a crazy dynamic, but it's happened many times in recent business cycles. The unemployment rate goes down, things look great, but the unemployment rate isn't going down because people are getting jobs. It's going down because people are leaving the labor force. Let's take a look at a math example of this to see what it might look like in practical terms. Let's say there are 10 million people in the labor force and 8 million unemployed people. That would be a horrible situation, but let's keep the numbers easy for…

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