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## Finance and capital markets

### Course: Finance and capital markets>Unit 10

Lesson 1: Unemployment

# Unemployment rate primer

Understanding how the headline unemployment rate (U-3) is calculated. Created by Sal Khan.

## Want to join the conversation?

• how do they know who is actively looking for a job? they would have to actually file for unemployment to be a part of the statistic? what about the people that do not file for unemployment that are unemployed and looking for a job?
• Every week, the Bureau of Labor Statistics calls approximately 60,000 individuals and asks various questions, such as are you employed, if not, have you looked for work in the last four weeks, etc. From these calls they statistically represent the number of unemployed workers.
• What about those people who are working part time but want to work full time? How do those people figure into the unemployment rate? How does the government figure those people into the calculation making the rate so much higher?
• Those who work part time but want to work full time are called underemployed and they are not figured into the unemployment rate at all. Therefore the government does not factor this in when looking at the unemployment rate. However, the BLS and economists do try to calculate the number. Most likely a survey of households (such as the household survey they use for the actual unemployment number) is used to tell the percentage of underemployed in the work force.
• I guess you could say that the same affect happens to the unemployment rate if someone actually finds a job or someone becomes discouraged and stops looking? So just looking at the unemployment rate would be wrong, you would have to look at the labor force relative to the people looking for work so you can compare apples to apples.
• I would like to know the examples about frictional, structural, and cyclical unemployment. Thank you.
• How do they know someone has or has not looked for a job in the last four weeks as you point makes a different if that person is counted as in the workforce.
• In the United States, a government agency called the Bureau of Labor Statistics regularly conducts a survey of several thousand households across the country to ask questions about who lives in the household, how many of them are currently working and for how many hours a week, and how many of them are not working and why. From the answers to these questions, the BLA generates their initial estimate of unemployment each month, which then gets adjusted later when additional information from other sources is acquired (such as applications for unemployment insurance). Of course, as with any survey or poll, the assumption is that people are answering the BLA's questions honestly and accurately.
• A worker is paid by two kinds of rate. The piece rate and time rate. Piece rate is where the workers are paid depending on the quantity of products while a time rate is the payment for a period of time. Does anyone know what are the advantages of piece rate? Thx
(1 vote)
• Oh yes thanks Andrew!
The advantage = the production runs normally with high quantity of production every day
The disadvantage = the worker will not focus on the quality.
• How do they determine actively looking for a job. Is it random surveys?
• I'm still confused... I don't have a figure for the unemployment rate.. How do i figure out to get the unemployment rate without a number?
(1 vote)
• If I understand you correctly, you want to find the percentage of the labor force that is unemployed. This is an algebraic computation.

#unemployed = X% of #labor_force
or
#unemployed / #labor_force = X% unemployment rate
• i find it really hard to understand the relationship between economic / business cycle and unemployment.

i get that part where you have the unemployed people but how does that have a connection to the business cycle
(1 vote)
• Unemployed people have less income to buy stuff. When they buy less stuff, the companies that make stuff don't take in as much money. When they take in less money, they may lay people off. Then those people have less money.

When the cycle eventually bottoms out and reverses, then people are going back to work, making more money, spending more money. Companies make more stuff, hire more people, etc.