3. Explain how discouraged workers either overstate or understate the unemployment problem.
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This can artificially inflate the unemployment rate as these individuals are technically unemployed but not actively looking for work. Show more…
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If many workers become discouraged from looking for jobs, explain how the number of jobs could decline but the unemployment rate could fall at the same time.
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An exodus of discouraged workers from the job market kept the unemployment rate from climbing above 10 percent. Had the labor force not decreased by 661,000 , the unemployment rate would have been 10.4 percent. The number of discouraged workers rose to 929,000 last month. Source: Bloomberg, January 9,2010 What is a discouraged worker? Explain how an increase in discouraged workers influences the official unemployment rate and $\mathrm{U}-4$
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