Question

Is it possible for the unemployment rate to go down while the number of unemployed workers increases?

		Yes, if the labor force partication rate increases.
		Yes, if the size of the working age population increases by less than the increase in those adults actively looking for work.
		No, any increase in the number of unemployed will result in an increase in the unemployment rate.
		Yes, if the labor force particiation rate decreases.

Answer 1

Answer: 1^st option

Yes; it may happen if labor force participation rate increases.

An example is taken below for understanding.

Suppose total population 150, labor force participation is 100, employment is 80, and unemployment is 20.

Labor force = Employed + Unemployed = 80 + 20 = 100

Unemployment rate = (Unemployed / LaborForce) × 100 = (20/100) × 100 = 20%

Labor force participation rate = (Labor force / Eligible people to participate) × 100 = (100 / 150) × 100 = 66.67%

Now, suppose labor force participation increases to 130 out of the total population 150; if unemployed increases to 25, the situation would be as below:

Labor force = Employed + Unemployed = 105 + 25 = 130

Unemployment rate = (Unemployed / LaborForce) × 100 = (25/130) × 100 = 19.23% (go down)

Labor force participation rate = (Labor force / Eligible people to participate) × 100 = (130 / 150) × 100 = 86.67%