Which two components are used in the unemployment rate formula?

• A. Employed and population
• B. Unemployed and labour force
• C. Employed and labour force
• D. Unemployed and population

Answer: (B)

Unemployment rate compares how many people who want a job but don’t have one to the total number of people who could work. The two numbers involved are the number of unemployed people and the labour force (which is all people who are employed plus those who are unemployed and actively seeking work). So the rate is unemployed divided by labour force, times 100.

The labour force is the key denominator because it represents everyone who could be working or is looking for work, while the number of unemployed is the numerator that shows those currently without work but seeking it. Using employed with population would mix in people not looking for work, and using unemployed with population would distort the measure by including people outside the labour force.