Employment Rate

This chart illustrates the recent trend of the unemployment rate. Notice that while the overall trend is gradually upward, the rate does take a dip from time to time. These dips are the result of business-cycle contractions. A dip during the recessionary periods in the 2000s, 1990s, and 1980s is clearly seen in the chart. While the declines might not seem like much, keep in mind that each percentage point is a 1 percent of the total civilian noninstitutionalized population (which is about the 200 million people). As such, a drop from 62.8 percent to 61.8 percent is about 2 million people.

The calculation of the employment rate is illustrated using this equation:

employment rate

=

employed persons total noninstitutionalized civilian population

x 100

Suppose that the total noninstitutionalized civilian population is 206,000 people and the number of employed persons is 133,000. The employment rate is calculated as:

employment rate

=

133,000 206,000

x 100

=

64.6%

The employment rate is closely associated with the labor force participation rate. The labor force participation rate is the ratio of the sum of both employed and unemployed to the total noninstitutionalized civilian population. The employment rate is simply the ratio of employed persons to the total noninstitutionalized civilian population.

The connection between the employment rate and labor force participation rate is also noted by the general upward trend in the employment rate. In the late 1940s, the employment rate was in the mid-50 percent range. By the late 1990s, this rate had gradually risen to the mid-60 percent range. Much of this increase can be attributed to the increased participation of women in the labor force, which resulted from a change in the traditional role of women as housewives, stay-at-home mothers, and homemakers. The end result is that the economy has found employment for a larger fraction of the population, resulting in an increase in total production.