In June, the labor force is 130 million, there are 9.1 million unemployed workers, the job losing rate is 3% per month, and the job finding rate is 40% per month.

a. What is the unemployment rate in June?

b. How many workers are unemployed in July? What is the unemployment rate in July?

c. At what unemployment rate would the number of unemployed remain the same from one month to the next?

a) 7% b) 9 087 000; 6.99% c) 6.976%

Explanation:

The question is divided into 3 parts

Part a) Compute the unemployment rate in June

The formula = The total number of people unemployed in June / The Labor force recorded for that june

= 9 100 000/130 000 000 x 100 = 7%

b) Two parts:

Part 1) how many workers are unemployed in July?

To calculate this

= The total number of unemployed in June + The number unemployed in July - the number of people employed in July

= 9 100 000 + 0.03 (130 000 000 - 9 100 000) - 0.04 (9 100 000)

= 9 087 000 workers

Part 2) The unemployment rate is as follows

9 087 000 / 130 000 000 = 6.99%

c) At what unemployment rate would the number of unemployed remain the same from one month to the next?

The rate represents a steady rate of unemployment such that there is no recorded change in unemployment rate.

= The rate of job losing / (the rate of finding job + the rate of job lose)

= 3% / (40% + 3%) = 6. 976%