Chapter 7, Problem 7.1LO

To determine

:

The way the U.S government calculates the official unemployment rate.

Concept Introduction:

Unemployment rate:

It is defined as the fraction of the labor force that is jobless at a given time period. Unemployment rate is calculated by dividing total number of unemployed or jobless people by the total number of people in the labor force.

  $UnemploymentRate=\frac{Numberofunemployedpeople}{Total\text{}LaborForce}$

Explanation of Solution

Answer:

The U.S government under the division of Bureau of Labor Statistics ( BLS ) conducts a survey every month called the Current Population Survey ( CPS ) in order to measure the extent of unemployment in the country.

This survey covers about 60,000 households. The residents of these households are asked questions about their status of employment.

Based on the responses to these questions, the Bureau of Labor Statistics estimates the total labor force which gets divided into sections of employed and unemployed.

Once, the labor force is divided into employed and unemployed, the Bureau estimates the current unemployment rate (the percentage of labor force that is unemployed).