Indroduction
Hey everyone and welcome back to the channel! In this video, we'll be learning how to calculate the labor force participation rate, the unemployment rate, and the employment rate. With that said, let's get into it!
Data from Statistics Canada
What better data to use than the actual data from the labor force survey collected by Statistics Canada and released to us on December 2nd, 2022? So the key information that we're looking at is the population, labor force, employment, and unemployment rows. We want the most recent data, so we're looking at November of 2022 as these are the official numbers for Canada.
So let's take the data that we want to use and then calculate these key pieces of information.
Working Age Population
So now I've collected all of my data from November of 2022. The population (it's worth noting) is the population age 15+, known as the working age population in Canada. The labor force is the sum of all employed and unemployed people.
Now you'll notice all of these numbers are in terms of thousands. If you took these numbers and multiplied them all by 1000, that would give you the actual values. So note the working age population of Canada is not 31,964.7 but rather 31.96 million. Just thought I'd mention that in case any of you thought that Canada was just an abnormally small country.
The Three Key Rates
The three rates that we're calculating today are the unemployment rate, the labor force participation rate, and the employment rate. These are the three rates that you will be expected to calculate in an introductory macroeconomics course.
Formulas
The formulas for these are as follows:
Unemployment Rate: The unemployment rate is equal to the number of people unemployed divided by the number of people in the labor force, times 100 (because we want it to be a percentage).
Labor Force Participation Rate: The labor force participation rate is equal to the number of people in the labor force divided by the total working age population, times 100 (again, we want a percentage).
Employment Rate: The employment rate is the number of people employed divided by the working age population.
Important Note on Denominators
Now, it's important to note that the denominator of the unemployment rate is the number of people in the labor force, but the denominator of the employment rate is the total number of people in the working age population. Therefore, the unemployment rate plus the employment rate will not sum to one. I just wanted to make that distinction because that's an area I see a lot of students mess up.
Calculations
So we have all of the information we need to calculate these, so let's get started.
Unemployment Rate: We have the total number of people unemployed, which is 1,049.6 (remember, this is in terms of thousands), divided by the total labor force, which is 20,715.9. This gives me a decimal value of 0.0507, and of course, I would multiply that by 100 because I want it as a percentage, and that gives me 5.1%.
Labor Force Participation Rate: I have my labor force, which is 20,715.9, divided by the total working age population, which is 31,964.7. This is going to give me a decimal value of 0.6481, which, multiplied by 100 to turn it into a percentage, is going to give me 64.8%.
Employment Rate: Finally, we have the employment rate, which (remember) is the number of people employed divided by the working age population. That gives me 19,666.3 divided by 31,964.7. That gives me a decimal value of 0.6153, and of course, multiplying by 100 to get myself a percentage, 61.5%.
Verification
Now, going back and checking the labor force survey data, all three of these rates that you calculated perfectly match the rates determined by Statistics Canada. And there you have it—it's as simple as that!
Common Mistake
Once again, remember that the denominator for the unemployment rate is not the same as the denominator for the employment rate. Again, that's the biggest mistake that students make when calculating these rates, and therefore the unemployment rate and the employment rate do not sum to 100 as you can clearly see.
Future Video Plans
In the future, we plan on making a video where you're given the employment rate, the labor force participation rate, or the unemployment rate, and then required to reverse engineer those to give yourself the key pieces of information—that is, the working age population, the labor force, the number of people employed, and the number of people unemployed. So let us know in the comment section if that's something you're interested in, and we can prioritize making a video like that.
Conclusion
If you found this video helpful, let us know by liking the video, subscribing to the channel, and of course, let us know in the comments section what type of economic videos you'd like to see us cover in the future. Thanks for watching this video, and we'll catch you in the next article!
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