Unemployment Rate Formula

Unemployment Rate Equation

The formula for unemployment rate is the number of unemployed workers apportioned with the available civilian labor force at that point in time. In order to calculate unemployment rate, we use the unemployment rate formula i.e Unemployment Rate = Unemployed ÷ Civilian Labor Force

Or

Actual rate of unemployment formula = Number of Unemployed Individuals ÷ (Number of Employed Individuals + Number of Unemployed Individuals)

\[U=\frac{\text{Unemployed People}}{\text{Labor Force}}\times100\]        


How Do We Calculate Labor Force Participation?

It can be calculated using the labor force participation rate formula. The labor force participation rate is basically a measure of an economy's active workforce. The formula for the number is the sum of all workers who are employed or actively seeking employment divided by the total noninstitutionalized.

In other words, the participation rate is the sum of all workers who are either employed or actively looking for work apportioned with the total noninstitutionalized (civilian working-age population). Thus, formula of labor force participation rate = Labor Force ÷ Civilian Noninstitutional Population) x 100


Types of Unemployment

There are mainly 3 types of unemployment:

  1. Frictional Unemployment: It is in the wake of voluntary job turnover, such as when people quit a job they do not prefer to get a better one.

  2. Structural Unemployment: It takes place when job skills no longer match any new jobs available. That's generally induced by—and also results in—long-term unemployment.

  3. Cyclical Unemployment:  It is of the kinds the media talks about the most. It rises enormously in the contraction phase of the business cycle. A recession has already begun by the time the unemployment rate blows since unemployment is a lagging indicator. Organizations wait until they're sure that demand won't return to erstwhile levels before laying off workers.


How to Calculate Cyclical Unemployment?

We can calculate the cyclical unemployment rate by using cyclical unemployment rate formula which is current unemployment rate - total of the frictional unemployment rate and the structural unemployment rate

FAQs (Frequently Asked Questions)

1. What is the Unemployment Rate?

Answer: The unemployment rate is basically the total percent of the labor force that is jobless. It is a lagging sign, meaning that it usually rises or falls owing to changing economic conditions, instead of foreseeing them. When the economy is in a bad phase and jobs are scarce, the unemployment rate can be anticipated to increase. On the other hand, when the economy is prospering at a healthy rate and jobs are relatively abundant, the unemployment rate can be expected to fall.

2. What are the Terms and Conditions For Being Considered Unemployed?

Answer: To be considered as unemployed following are the parameters:-

  • An individual should be of 16 years of age and is available to work full time in the past four weeks.

  • The individual must be actively searching for a job during this period.

  • The exceptional cases would be those who are laid off temporarily and are looking to join back.

  • The civilian labor force, as mentioned in the formula of labor force participation rate, comprises both employed and unemployed people.