Economics Questions

· These rates are averages and as such it’s necessary to be very careful in how we interpret them. For example, if the Re =92%, Ru = 3.4% and the Rund =4.6% in the US economy, what exactly do these averages mean for the US economy?

First, the Re of 92% means that in the whole economy or the macro-economy of the US if we randomly select 1,000 residents across the US about 920 will have jobs whether full time jobs, part time jobs, self-employed jobs or jobs at which they are underemployed. It does not mean that in every state, city, village and county across the US 92% of the labor force will be employed as the rate of employment will probably be above ,below or equal to the national rate of employment in each state, city etc.

Second, the Ru of 3.4% means that overall for the whole economy, if 1,000 residents are randomly selected an estimated 30 residents will be unemployed nationally. However, it does not mean that the Ru is 3.4% in each state, county and city as the Ru is an average that varies above and below or equal to the national rate of unemployment.

Third, the same thing is true for the Rund of 4.6%.

· Thus, we must always remember to avoid the fallacy of composition whenever we interpret these averages for the labor force i.e. we must remember that what’s true about the whole economy is not necessarily true about the parts of the whole economy such as the states, cities and counties that make up the whole economy.

· Finally, the rates of employment and unemployment are inversely related and as discussed earlier discouraged or marginalized workers who are not counted by the BLS’ monthly Household Surveys will likely cause the monthly rate of unemployment to rise or fall depending on the # of discouraged workers and hence will cause the rate of employment to also fluctuate. The latter fact therefore requires even more care in interpreting these rates for the labor force!!

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