Soundbite Statistics: the Unemployment Rate | 41 comments (41 topical, editorial, 0 hidden)

http://bigpicture.typepad.com/comments/2007/06/the_return_of_n.html

The Return of NILF
Over the years, we have mentioned on more than one occasion the not-as-dirty-as-it-sounds measure, NILF. No, it has nothing to do with moms -- rather, it stands for Not In Labor Force.
It is one of the reasons the official BLS unemployment rate is actually understating the actual unemployment rate.
A quick primer on how this works: The Unemployment rate is depicted as a percentage, and like all percentages, it is actually a fraction. You take the total number of people in the labor pool, the total number of workers:
    Employed Individuals

    _______                =   Percent Employed 
    Total Labor Pool
Subtract the percent employed from 100% and you get the unemployment rate.
Most of us think about the unemployment rate going down due to more people getting jobs. But there's also another way the official unemployment rate can go down. It happens when the denominator -- the bottom number of the fraction -- goes down.
And that is what has been occurring again recently. The Labor Pool has shrunk, making the unemployment rate look better than it actually is.
[...]

by Laurent GUERBY on Sat Jun 2nd, 2007 at 09:38:42 AM EST

Re: NILF concept (none / 0)

Yes, Not In Labour Force is the interesting segment (= "inactive population" above).

I don't get his terminology, though. If you calculate the percentage he indicates (assuming "Labor Pool" = total working-age population), you get the employment rate (called by OECD employment/population ratio). If you subtract that from 100%, you don't get the unemployment rate, you get the percentage of (unemployed persons + NILF).

Either that or he's calling "Labor Pool" what he elsewhere calls "Labor Force".

Am I missing something, as they say?

by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jun 2nd, 2007 at 11:28:14 AM EST
[ Parent ]

Re: NILF concept (none / 0)

I think he uses labor pool = labor force.

by Laurent GUERBY on Sat Jun 2nd, 2007 at 12:22:51 PM EST
[ Parent ]

Soundbite Statistics: the Unemployment Rate | 41 comments (41 topical, 0 editorial, 0 hidden)