Can the unemployment rate fall even if fewer people are working?
By EconoFact
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YES
The unemployment rate is defined as the number of people looking for a job who cannot find work divided by the entire labor force. Importantly, the labor force includes those people with jobs plus those who actively searched for employment in the last 4 weeks. If someone who is unemployed stops looking for a job, they are no longer considered to be in the labor force, and the unemployment rate falls – both the number of unemployed and the labor force decline, but there is a bigger proportional decrease in the former than in the latter so the ratio decreases.
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Sources
FRED (Federal Reserve Bank of St. Louis) Total Unemployed, Plus All Persons Marginally Attached to the Labor Force, Plus Total Employed Part Time for Economic Reasons, as a Percent of the Civilian Labor Force Plus All Persons Marginally Attached to the Labor Force (U6RATE)
Federal Reserve Bank of St. Louis Unemployment Rate
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