Understanding unemployment, employment, and labor force participation
Summary
In a fictional scenario students learn to evaluate an economy based on labor market conditions
CollapseContext for Use
It would be helpful for an instructor to cover U-3 and U-6 in class in advance.
This particular exercise does not involve calculations but rather asks students to evaluate economic situation with the given information.
This exercise can be followed by the application exercise Unemployment rate and labor force participation rate [insert link]
Overview
In this exercise students evaluate a fictional economy focusing on the employment rate (U3 & U6) and labor force participation rate.
Expected Student Learning Outcomes
1. Students are able to define the unemployed, not in labor force, and labor force.
2. Students are able to evaluate the condition of labor market using indicators.
3. Students are able to understand the alternative unemployment rates.
Information Given to Students
For past several years, the kingdom of Klingon experienced a falling GDP growth rate with an inflation rate at 1%. There were many Klingons who were working for part time because they were not able to find full time positions due to the economic situation. There were many Klingons who lost their jobs, and couldn't find any new job. Some of them kept looking for new positions, but others had decided to stop and wait till the job market improved.
This year, the kingdom of Klingon is experiencing an increase of GDP growth rate with inflation rate at 2%. Klingons who used to work for part time now are able to find a full-time employment. Klingons who were not working, nor looking for a job are now starting to look for work because of the more optimistic economic situation. They have start to search for work, but has not succeed yet.
Which of the following statistics for Klingon best describe its economics condition?
a. Official unemployment rate (U3)
b. Unemployment rate to include discouraged workers and part-time workers for economic reasons (U6)
c. Labor force participation rate
d. Change in the number of workers with full time employment
e. Change in the number of employed workers full or part-time
TBL AE Unemployment rate (Microsoft Word 2007 (.docx) 14kB Jul24 18)
Teaching Notes and Tips
In this year, the labor force participation rate would increase as the economic situation changes. As discouraged workers, who were not in labor force, become an active job seeker, it is possible that the Klingon would experience the higher unemployment rate as this year's economic situation improves. Also, more people are employed full time instead of involuntary part time.
Given all this information, U3 might not be the best labor market indicator to capture the economic condition, however, U6 would be. Also, labor force participation rate would reflect an optimistic labor market condition. The number of full time workers and part-time workers can complement U6 and labor force participation rate.
Lastly, U3 can increase slowly when economic situation improves as unemployment rate is a lagging indicator.
What would happen to U-6 rate in last year?
What would happen to labor force participation rate in this year?
What might happen to U-3 unemployment rate in this year?
What is a lagging indicator?
What is a leading indicator?