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What does the unemployment rate mean for the US economy?

Question

What does the unemployment rate mean for the US economy?

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Step 1

Let us discuss certain concepts related to unemployment rate:

Labor force: In an economy, labor force refers to the part of the working age population (aged 15-69) that is willing and able to work. It is the sum of employed and unemployed people.

Employed: Those people who belong to the labor force and are working belong to the employed category.

Unemployed: This includes the people who are willing and able to work but do not possess job.

Unemployment: Unemployment refers to the situation where people in the working age population (aged 16-59) are willing and able to work but cannot find work.

Unemployment rate: It is the number of people unemployed as a percentage of labor force. It is calculated using the formula below:

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Step 2

According to the Bureau of Labor Statistics, unemployment rate in US hovers around 4% recently (as of June 2018). The following figure gives the statistics on unemployment rate by Bureau of Labor Statistics for the last few years.

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Step 3

Unemployment rate gives a measure of the situation of joblessness in a country. It gives an approximate percentage of people who are willing and able to work but are not able to find jobs. The unemployment rate in US is around 4%. It implies approximately ...

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