Explain what is the difference between the rate of unemployment and the level of unemployment
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Answer:
The key difference between the two is the participation rate measures the percentage of Americans who are in the labor force, while the unemployment rate measures the percentage within the labor force that is currently without a job.
The employment rate is the inverse of the unemployment rate. It also is total employed as a percentage of the labor force.
Analysts also look at a different employment measure, the employment/population ratio. That is total employed as a percentage of the civilian noninstitutional population.
All these numbers are estimations based on surveys, but employment/population is a little more reliable than employment/labor force. Estimation of the labor force requires drawing a fuzzy line between jobless people who are viable work candidates and the jobless who are not really employable.
The labor force is supposed to include all working people plus unemployed people who are available to work now and who sought work within the past month. Exactly defining “available to work” and “sought work” is where the squish comes in.
In the aftermath of the Great Recession, the number of long-term unemployed Americans shot to a longtime high.
From 2007–14, the labor force participation rate (labor force/population) fell from more than 66% to less than 63% (about 350 basis points).
From 2007–09, employment/population dropped from >63% to <59% (about 450 bp), remaining below 59% until 2014.
From 2007–09, the official unemployment rate rose from a low point of 4.4% to a peak of 10.0% (or 560 bp).
From 2009–14, some of the improvement in unemployment rate stemmed from a decline in the labor force participation rate — specifically, the number of people counted as unemployed. Employment/population did not begin to recover until five years after the recession ended.