Question

The unemployment rate gets plenty of media coverage. And the Great Shutdown of 2020, in response to the Corona virus, has pushed the US unemployment rate to record levels. Discuss if the official unemployment rate is an accurate indication of the employment conditions. What may be potential measurement issues?

Answer 1

The official unemployment rate may lead to underestimation of the the treu unemployment condition of the economy because it excludes the number of discouraged workers of the economy or those who have left searching for jobs because of work being not availbale to them when they were searching got it. After the Great Shut Down of the 2020 mainly because of the pandemic, made many workers become discouraged workers who were earlier considered as unemployed and counted in the labor workfoce because of lack of job opportunities in the economy. This leads to under estimation of the unemployment rate and thus does not provide a true picture of the Indian economy. Thus, considering U-6 measure of unemployment rate which takes into consideration the number of discouraged workers in the economy will help in providing a true picture of the unemployment rate in the economy. Some measurement issues may include how to define a discouraged worker uniformly and spike in the level of unemployment which can happen by taking into consideration the number of discouraged worker in the economy.

Thus, U-6 measure of unemployment rate should be used to provide a better picture of the economy related to unemployment rate.