Employment rose modestly in December, and the unemployment rate was unchanged
at XXX percent, the Bureau of Labor Statistics of the U.S.
Department of Labor reported today. Total nonfarm payroll employment
increased to 124 million. The number of unemployed persons, 8.2 million, and
the unemployment rate were unchanged in December.
a. Calculate the size of the labor force and the unemployment rate.
124 mil + 8.2 mill = 132.2 mill
b. Assume the natural rate of unemployment is 4%. Use Okun's Law to calculate the percentage
loss in GDP. Explain your results in a sentence.
GDP would drop 2% for every 1% increase in
the UR. GDP would drop 8%
c. What would be the direct impact on the unemployment rate if 1 million full time jobs were
reduced to part time jobs?
Nothing would happen
d. What would the unemployment rate be if 3 million students (who were previously not working
or seeking work) graduated and started looking for work, but none of them immediately found
jobs?