Unemployment
Unemployment Rate Primer (v2) How the unemployment rate is calculated
⇐ Use this menu to view and help create subtitles for this video in many different languages.
You'll probably want to hide YouTube's captions if using these subtitles.
- What I want to do in this video
- is think a little bit about
- how the unemployment rate is actually computed
- by the bureau of labor statistics.
- So to figure that out, let's just start off
- with the entire US population. So let me
- draw a big circle here that represents the entire US population.
- US population, and right now, if my numbers are correct
- the latest numbers are 304,000,000 people.
- Now, not all of those 304 million people are capable of working
- including my 2 1/2 year old son, or my new born daughter,
- so, you have to think, when you think of unemployment
- you want to think about the percentage of these people that are actually old enough
- to work, that actually can be employed theoretically.
- So let's take a subset of that US population
- and let's think about who's essentially an adult
- who's working age?
- So this subset right over here is 16 years
- and older. So people who can legally work
- and the numbers I have here, this is 100
- sorry, this right here is 237,000,000 people
- Now, we can't just say all of these people could possibly work
- because a lot of them are in college
- some of them are in high school, some of them might not have
- the ability to work, some of them might be retired,
- so what we want to do is take a subset of this
- population that is essentially you could say,
- part of the labor force, in that they are working
- or they are actively looking for work.
- Let me draw that right over here.
- So this right over here is the labor force.
- So these are not retirees, or people who are in college
- those people would be sitting right over there
- assuming they are 16 years or older.
- The labor force, this is working and actively looking for work
- and we'll think about what actively looking for work means
- in a little bit more depth in a few minutes.
- Actively looking for work.
- And that number, if my numbers are correct,
- is right around 154,000,000. Although the numbers
- here are not so important, the more important thing
- is the idea of how the unemployment rate itself is calculated.
- And then so within the labor force, you have a subset
- So this is working and actively looking for work.
- So you have a subset of the labor force that is actively looking for work.
- So they don't have a job, but they're actively looking.
- So this right here is unemployed
- and actively looking, this actively looking
- is probably more important than you might realize at first.
- And this number, let's just say for the sake of argument
- this is sitting around 15,000,000 people.
- So if you have a job, you're right over here,
- if you don't have a job, but are actively looking
- you're going to be right over here.
- What we're going to see in a little bit is
- if you have, if you don't have a job, but you are
- not actively looking, you could be working
- you would actually be sitting out here.
- This is going to be interesting when we think of trends
- and the unemployment rate, when it goes up or down.
- But just to see how the unemployment is calculated
- let's use, let's do it for this example.
- So the unemployment rate
- is literally just the number of unemployed,
- over the entire labor force.
- So in this situation, it would be
- 15,000,000, so that's just the number of unemployed
- and actively looking, over the entire labor force
- Over 154,000,000. So if we get my handy TI 85 out
- that gives us in this example right over here
- and unemployment rate of 15 divided by 154 million.
- So it's about 9.7, if we write it as a decimal, it would be 0.097
- if we write it as a percentage, this would be 9.7%
- so this is approximately 9.7%.
- Now I told you that the details are going to be important
- And the reason why they are is interesting things happen
- when people stop looking for work, or when they
- start looking for work.
- So I said "unemployed and actively looking"
- puts you in this bucket over here.
- If you're unemployed, if you don't have a job
- and you're not actively looking
- you're actually not in the labor force.
- And so you might be saying, "Sal, what does it mean
- to be actively looking for work?"
- And this means that you've looked for a job
- or you're actively searching in the past
- We'll do this in a new color
- in the past 4 weeks
- And you might say "Sal, how do they know whether these 15 million people,
- have actively searched for jobs in the past 4 weeks?"
- And the answer is they do a survey.
- They're not going to survey every human being in the labor force
- or the US population, or all 15 million
- that are unemployed, that would be logistically impossible
- what they do is they do a survey
- and right now they do about 60,000 every month
- and they essentially ask them,
- are you employed?
- are you unemployed?
- if you are unemployed, have you looked for a job
- in the past 4 weeks?
- If you have looked for a job in the past 4 weeks
- as an unemployed person, you'd get thrown into this bucket
- right here, you're actively looking, you're still part of the labor force
- but if you've got so discouraged that you're no longer
- looking for work, maybe you've given up
- then you get thrown out of here, you get thrown
- out of the labor force. And that is what most people
- don't realize, when things get bad enough
- and people get really discouraged,
- you have people not going,
- you have people actually exiting the entire labor force
- and see how that affects the numbers
- imagine a situation, so this is the unemployment rate
- right now, there's 15,000,000 who are unemployed
- and actively looking for work. Let's say that this
- is just a horrible recession or depression
- and 5,000,000 of these people get so
- discouraged, they don't, in the last 4 weeks
- they do not look for work anymore.
- So they've maybe stopped altogether or they want to take a break
- so what we're gonna do, is we're going to take
- 5,000,000 people out of this bucket over here,
- so we're going to take 5,000,000 people and move them
- out over here. Outside of the labor force.
- If you did that what happens?
- Well now, the number, the official unemployed number
- is now going to be 10,000,000
- and what's the labor force number?
- Remember, they went completely out of this green circle over here
- So they also left the labor force,
- so the labor force number is now 149,000,000
- So in this bad situation, where people have left the labor force
- the unemployment rate would now be 10 million people
- unemployed and actively looking for work
- over a labor force of 149,000,000.
- The labor force has shrunk because they're so discouraged
- so what do we get there as our unemployment rate?
- We have 10 divided by 149
- it gives us 6.7%
- So this is fascinating, if things get bad enough
- and people actually exit the labor force
- then the unemployment rate could actually go down
- because the labor force is shrinking.
- The other thing could also happen,
- maybe things get really good and you have
- 10,000,000 people who are sitting out here
- they're either marginally attached to workers,
- which are people who are hoping to get a job,
- but haven't looked for a job in the past 4 weeks
- or they could be discouraged workers
- who would mind working, but they've given up altogether looking
- but you can imagine when the economy gets good
- let's say we're starting from this baseline
- here, the economy gets good, and all these people
- who are unemployed, but not part of the labor force,
- all of a sudden start looking for work.
- So then they'd be part of the official unemployed
- So 10,000,000 would grow to 20,000,000
- So now this number is 20 million, and this green area
- would go up by 10 million,
- so now this would be 159 million,
- so in this situation, the official unemployed would be
- 20 million, and the entire labor force would be
- 159 million, and now you get a situation
- so you have 20 divided by 159 million,
- which is 12.6%
- Approximately 12.6%
- So the whole point of this video,
- I'm not saying that the unemployment rate is
- the way it's calculated is wrong, or that it's
- supposed to be misleading,
- I just want to give you a little bit of nuance
- that it doesn't always give the complete picture
- in particular, that one number, just this
- and there's other unemployment rates that give
- a little bit more nuance here, but this one
- headline unemployment rate that's typically given on the news
- doesn't capture the whole story, in particular
- it doesn't capture the people who might be exiting
- the labor force when things are bad, so in that situation
- the unemployment rate would probably be
- understating how bad things are.
- And it also doesn't capture the people who are entering the labor force
- in that situation the unemployment rate
- would probably make things look worse than they are
- when things might actually be improving.
Be specific, and indicate a time in the video:
At 5:31, how is the moon large enough to block the sun? Isn't the sun way larger?
|
Have something that's not a question about this content? |
This discussion area is not meant for answering homework questions.
Discuss the site
For general discussions about Khan Academy, visit our Reddit discussion page.
Flag inappropriate posts
Here are posts to avoid making. If you do encounter them, flag them for attention from our Guardians.
abuse
- disrespectful or offensive
- an advertisement
not helpful
- low quality
- not about the video topic
- soliciting votes or seeking badges
- a homework question
- a duplicate answer
- repeatedly making the same post
wrong category
- a tip or feedback in Questions
- a question in Tips & Feedback
- an answer that should be its own question
about the site
Share a tip
Suggest a fix
Have something that's not a tip or feedback about this content?
This discussion area is not meant for answering homework questions.