Question

Q6. Explain why most experts believe that official U.S. data underestimate the actual rate of unemployment. What factors could make the official rate overstate the actual unemployment rate?

Answer 1

The official rate overstate the actual unemployment rate because it is hard to ascertain how many people are a part of the labor force.

Explanation:

The unemployment rate is computed by measuring the percentage of those who are available in the labor force but remain unemployed.

The unemployment data is thus found out monthly, this also makes it difficult to define the labor force every month as it can fluctuate due to the reasons people have for not seeking jobs at a certain point of time.

Number of unemployed is divided by the number in the labor force to find the unemployment rate but the faulty measures mean that it is hard to ascertain which data is correct.