Answer to Question #159894 in Macroeconomics for hellen

Question

Suppose a worker loses their job; they want a new job, immediately searches for a new job, are available for work if offered.

(a) Is this worker unemployed? Will the labor force participation rate go up, down, or remain unchanged when this happens?

Suppose five weeks pass, without this worker searching for a job again. They still want a job and are still are available for work.

(b) Is this worker unemployed? Explain your answer.

(c) Will the labor force participation rate go up, down, or remain unchanged, relative to

part 5a?

Answer 1

(a) The worker will be counted as Unemployed because the worker is having a job and is constantly searching for a new job. According to the bureau of labor statistics, Any worker who is not having a job and is constantly searching for a job is termed as Unemployed.

Labor Force Participation rate will remain unchanged because

Labor Force = Unemployed + Employed and Labor Force Participation Rate = [ Labor Force/Total Population ]x100

So, one unemployed will not affect Labor Force i.e ( Unemployed + 1 ) + ( Employed - 1) as the net effect is 0.

Therefore, Labor Force Participation will remain unchanged.

(b) This worker will not be counted as unemployed but will be counted as a discouraged worker because the worker is not looking for a job for more than four weeks. According to the bureau of labor statistics, a worker not actively looking for a job for more than four weeks will be counted as a discouraged worker.

(c) Labor Force Participation will decrease because

Labor Force = Unemployed + Employed and Labor Force Participation Rate = [ Labor Force/Total Population ]x100

So, One discouraged worker will affect Labor Force i.e ( Unemployed -1 ) + as the net effect is -1.

Therefore, Labor Force Participation will decrease.