Question

In June 2015, the unemployment rate declined to 5.3 percent from 5.5 percent in May. The labor force participation rate also declined from May to June, from 62.9 percent to 62.6 percent. If the labor force participation rate had remained unchanged from May to June, the unemployment rate for June 2015 would be

Answer 1

Answer: A. greater than 5.3 percent because the value in the numerator of the formula for the unemployment rate would increase more than the value in the denominator.

Explanation:

The unemployment rate is calculated by dividing the number of those who are unemployed but actively seeking employment by the labor force.

= Unemployed / Labor force

If the labor force participation rate had remained unchanged then that would mean that the denominator for the unemployment rate did not change while unemployment did.

The unemployment rate will therefore be greater than 5.3% because the numerator which is the unemployment figure, would have increase more than the denominator.