Unemployment rate primer (v2)발음듣기
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Unemployment rate primer (v2)
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Voiceover: 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.발음듣기
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U.S. population and right now if my numbers are correct, the latest numbers are 304 million people.발음듣기
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Now, not all of those 304 million people are capable of working, including my two and a half year old son or my newborn daughter so you have to think of, when you think about unemployment, you want to think about the percentage of these people that are actually old enough to work.발음듣기
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So let's take a subset of that U.S. population and let's think about who's essentially an adult, who's working age.발음듣기
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So this subset right over here is 16 years and older, so people who can legally work and the numbers I have here is that this is 100- sorry, this right here is 237 million people.발음듣기
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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.발음듣기
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So what we want to do is take a subset of this population, that is essentially part of the labor force in that they are working or they are actively looking for work.발음듣기
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The labor force, so this is working or- or I should say 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.발음듣기
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And that number if my numbers are correct is right around 154 million although the numbers here aren't so important, the more important thing is how the unemployment rate itself is calculated.발음듣기
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And so then 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.발음듣기
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Actively looking and this actively looking is probably more important than you might realize at first.발음듣기
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And this number, let's just say for the sake of argument, this is sitting at around 15 million people.발음듣기
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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.발음듣기
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What we're going to see in a little bit is if you don't have a job but you are not actively looking but you could be working, you would actually be sitting out here.발음듣기
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This is going to be interesting when we think about trends in the unemployment rate when it goes up or down.발음듣기
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So the unemployment rate- unemployment rate is literally just the number of unemployed over the entire labor force.발음듣기
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So in this situation it would be 15 million- so that's just the number of unemployed and actively looking over the entire labor force.발음듣기
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Over 154 million and so if we get my handy TI-85 out, that gives us in this example right over here, an unemployment rate of 15 divided by 154 million.발음듣기
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So it's about 9.7, if we write it as a decimal it's 0.097, if we write it as a percentage this would be 9.7 percent.발음듣기
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Now I told you that the details are going to be important and the reason why they are is because interesting things happen when people stop looking for work or when they start looking for work.발음듣기
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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.발음듣기
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And this means that you've looked for a job or you are actively searching in the past, let me do this in a new color, in the past four weeks.발음듣기
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And you might say, "Sal, how do they know whether these 15 million people "have actively searched for jobs in the past four weeks?"발음듣기
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They're not going to survey every human being in the labor force or the U.S. population or all 15 million that are unemployed, that would be logistically impossible.발음듣기
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What they do is they do a survey and right now they do about 60,000 people 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 four weeks?발음듣기
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If you have looked for a job in the past four weeks as an unemployed person you get thrown into this bucket right here, you're actively looking.발음듣기
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But if you've gotten so discouraged that you're no longer looking for work, maybe you've given up, then you get thrown out of the labor force.발음듣기
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If things get bad enough and people get really discouraged, you have people actually exiting the entire labor force.발음듣기
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Let's say that this is just a horrible recession or depression and five million of these people get so discouraged they don't, in the last four weeks, they do not look for work anymore.발음듣기
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So what we're going to do is we're going to take five million people out of this bucket over here.발음듣기
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So we're going to take five million people and move them out over here, outside of the labor force.발음듣기
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Well now the official unemployed number is now going to be 10 million, it's now going to be 10 million.발음듣기
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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 million, the labor force has shrunk because they're so discouraged.발음듣기
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If things get bad enough and people actually exit the labor force, then the unemployment rate could go down because the labor force is shrinking.발음듣기
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The other thing could also happen, maybe things get really good, maybe things get really good and you have 10 million people who are sitting out here,발음듣기
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they're either marginally attached workers which are people who are hoping to get a job but haven't looked for a job in the past four weeks, or they could be discouraged workers who have altogether, they wouldn't mind working,발음듣기
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let's say we're starting from this baseline here, when the economy gets good and all of these people who are unemployed but not part of the labor force all of a sudden start looking for work.발음듣기
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So this 10 million would grow to 20 million, 20 million so now this number is 20 million and this green area would go up by 10 million.발음듣기
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So in this situation, the official unemployed would be 20 million, and the entire labor force would be 159 million, and now you would get a situation- so you have 20 divided by 159 million, which is 12.6 percent.발음듣기
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So the whole point of this video, I'm not saying that the unemployment rate, the way it's calculated is wrong or that's it supposed to be misleading,발음듣기
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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, and there's other unemployment rates that give a little bit more nuance here,발음듣기
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but this one headline unemployment rate that is typically given on the news doesn't capture the whole story.발음듣기
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In particular it doesn't capture the people who might be exiting the labor force when things are bad,발음듣기
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so in that situation the unemployment rate would probably be understating how bad things are,발음듣기
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