Question

Suppose that there are 150,000 employed individuals and 6,000 individuals without a job, but actively searching for one. How large will unemployment be in the following period if the job finding rate is 75%, while the job separation rate is 4%

Answer 1

The unemployment will be as large as 7,500 individuals given the above scenario.

The above represents an increase of 1% in the unemployment rate, resulting from the job finding rate of 75% and job separation rate of 4% in the following period.

Step-by-step explanation:

a) Data and Calculations:

Employed individuals = 150,000

Unemployed individuals = 6,000

Total labor force = 156,000

Job finding rate = 75%

Job separation rate = 4%

number of new jobs = 4,500 (6,000 * 75%)

Number of new unemployed = 6,000 (150,000 * 4%)

Total number of unemployed individuals = 7,500 (6,000 - 4,500 + 6,000)

Old Rate of unemployment = 6,000/156,000 * 100 = 4%

New Rate of unemployment = 7,500/156,000 * 100 = 5%