14.3 Solved Problem

SOLVED PROBLEM The Current Population Survey

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Every month, the U.S. Census Bureau surveys about 60,000 American households to gather information about the U.S. labor force for the Bureau of Labor Statistics. The survey, known as the Current Population Survey (CPS), provides information about employment, unemployment, earnings, work hours, and more. Once these data are collected, researchers at the Bureau of Labor Statistics publish a number of tables describing their findings. Please complete the following table and analyze the trend in the unemployment rate, the employment-population rate, and the labor force participation rate from October 2014 through October 2015. Then determine whether the unemployment rate in October 2015 is high or low by historical standards.

Oct. 2014
(thousands)
August 2015
(thousands)
Sept. 2015
(thousands)
Oct. 2015
(thousands)
Civilian noninstitutional population 248,657 251,096 251,325 251,541
Civilian labor force 156,243 157,065 156,715 157,028
Labor force participation rate ? ? ? ?
Employed 147,260 149,036 148,800 149,120
Employment-population ratio ? ? ? ?
Unemployed 8,983 8,029 7,915 7,908
Unemployment rate ? ? ? ?
Not in labor force 92,414 94,031 94,610 94,513

STEP | 1 Complete the table.Read pages 378–379 and use Equations 14-1 and 14-2.

Equations 14-1 and 14-2 demonstrate how to calculate the labor force participation rate and the unemployment rate. The employment-population ratio is calculated as follows:

image

This is the completed table.

Oct. 2014
(thousands)
August 2015
(thousands)
Sept. 2015
(thousands)
Oct. 2015
(thousands)
Civilian noninstitutional population 248,657 251,096 251,325 251,541
Civilian labor force 156,243 157,065 156,715 157,028
Labor force participation rate 62.8% 62.6% 62.4% 62.4%
Employed 147,260 149,036 148,800 149,120
Employment-population ratio 59.2% 59.4% 59.2% 59.3%
Unemployed 8,983 8,029 7,915 7,903
Unemployment rate 5.7% 5.1% 5.1% 5.0%
Not in labor force 92,414 94.031 94,610 94,513

As shown in Equation 14-1 in the chapter, the participation rate is calculated by dividing the civilian labor force by the civilian noninstitutional population and then multiplying by 100. The October 2015 labor force participation rate is therefore image . As shown in Equation 14-2 in the chapter, the unemployment rate is calculated by dividing the unemployed by the civilian labor force and then multiplying by 100. The October 2015 unemployment rate is therefore image . The employment-population ratio is calculated by dividing the employed by the civilian noninstitutional population and then multiplying by 100. The October 2015 employment-population ratio is therefore image .

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STEP | 2 Analyze the trend in the unemployment rate, the employment-population rate, and the participation rate from October 2014 through October 2015. Is the unemployment rate in October 2015 high or low by historical standards?Read pages 378–379 and study Figure 14-1.

Both the unemployment rate and the labor force participation rate have steadily decreased over this period. The employment-population ratio has remained relatively stable throughout the period, as well. By historical standards, as indicated in Figure 14-1, an unemployment rate of 5.0% is relatively low.