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  • Wendell Brock

Unemployment - Economic Indicators

There are many economic indicators we can look at to increase our perspective of our country’s current situation. One of those indicators is unemployment.

Unemployment refers to a person who is not working, but is actively seeking employment, yet are unable to find work. The number of people working, or not working, is closely related to how healthy an economy is and if it’s growing at a reasonable rate. When people aren’t working, they lose out on wages. This has a domino effect which effects the entire country. If many families cannot buy goods or services, the businesses that would benefit from those customers lose out on income, which at high rates, leads to layoffs, resulting in higher unemployment. And the cycle continues. This indicates that the economy is producing less than it could.

However, there are shortcomings in using unemployment as an economic indicator. Only people who are actively seeking employment are considered in the data. Those who have given up the job search are not included, so the number of people not working (excluding those that are retired, physically unable, or enlisted military) is actually higher than what the unemployment data shows. In other words, the unemployment rate may show a decrease, but there are actually just as many, if not more able-bodied people not working.

Long story short, using unemployment data to help determine the state of our economy may paint a rosier picture than what currently exists. It's important to look at both changes in the unemployment rate as well as in the labor force participation rate.

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