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October 19, 2021 

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POLICY LAGS: A series of lags between the onset of an economic problem, such as business-cycle contraction, and the full impact of the policy designed to correct the problem, such as expansionary fiscal or monetary policy. Policy lags can take several years and are one of the key arguments against discretionary policies and for reliance on self correction and automatic stabilizers. Policy lags are often divided into inside lags, the time between the shock and the corrective policy, and outside lags, the time between the corrective policy and full impact on the economy.

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EMPLOYMENT RATE:

The ratio of employed persons to the total civilian noninstitutionalized population 16 years old or older. Also termed the employment-population ratio, the employment rate is used as an alternative to the unemployment rate as an indicator of the utilization of labor resources.
Because the employment rate is the ratio of employment to population, it does not suffer from underestimation problems attributable to discouraged workers and other unemployed persons that enter and exit the labor force. In particular, the unemployment rate goes up and down as people enter and exit the labor force, even though these folks have no affect on employment and production. When discouraged workers leave the labor force, the unemployment rate goes down, but the employment rate does not change. When high school and college students seek jobs during the summer months, the unemployment rate goes up, even though the employment rate does not change.

Employment Rate
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.

The employment rate is also closely connected to what is termed the dependency ratio, which indicates the degree to which the entire population depends on those actively engaged in production. When the employment rate increases, society has more people working and producing and thus fewer dependents not working and producing. The burden placed on each provider is less when more people do the providing.

<= EMPLOYMENT-POPULATION RATIOENDPOINT ELASTICITY FORMULA =>


Recommended Citation:

EMPLOYMENT RATE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2021. [Accessed: October 19, 2021].


Check Out These Related Terms...

     | unemployment rate | Current Population Survey | Bureau of Labor Statistics | labor force | civilian labor force | employment-population ratio | labor force participation rate | unemployment rate, measurement problems | alternative unemployment rates | employed persons | unemployed persons | not in the labor force |


Or For A Little Background...

     | unemployment | macroeconomic problems | macroeconomic goals | factors of production | full employment | business cycles | contraction | expansion | recession |


And For Further Study...

     | unemployment sources | natural unemployment | unemployment problems | unemployment reasons | unemployment, production possibilities | full employment, production possibilities | macroeconomic sectors | Bureau of Labor Statistics | gross domestic product | macroeconomic markets | resource markets | inflation | stabilization policies | government functions | underground economy | business cycle indicators | inflation |


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     | Bureau of Labor Statistics | Current Population Survey Home Page |


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