Labor is one of the factors of production. When labor sits idle, the economy produces less than it could. To measure idle labor, the government first has to sort every adult into groups, using careful definitions.
Key idea
The labor force is everyone who is employed plus everyone who is unemployed. Unemployed means: no job, available for work, and actively looked for work in the past four weeks (or on temporary layoff, waiting to be recalled). Adults who are neither are not in the labor force.
Why it works
The point is to measure people who want to work and cannot find a job. A retiree or a full-time student who is not looking is not "unused labor" in that sense; counting them as unemployed would make the number swing with the age of the population and with school enrollment. So the survey asks about behavior: did you work for pay, and if not, did you look for work?
In the United States, the Bureau of Labor Statistics runs the monthly Current Population Survey of about 60,000 households. It counts civilians 16 and older who are not in prisons, nursing homes or other institutions. Anyone who did any paid work in the survey week counts as employed, even one hour of part-time work.
| Person | Counted as |
|---|---|
| Works 10 hours a week, wants full time | Employed |
| Lost a job, applied for jobs this month | Unemployed |
| On temporary layoff, expects recall | Unemployed |
| Retired, not looking | Not in the labor force |
| Wants a job but stopped looking (discouraged) | Not in the labor force |
A worked example
Worked example: Finding the labor force
In millions of adults: 150 employed, 9 without a job and looking, 45 retired, 18 full-time students not looking, 12 caring for family at home, 2 discouraged workers. How large is the labor force?
- Only the employed and the unemployed (no job, looking) are in the labor force.
- $150 + 9 = 159$ million.
- The other $45 + 18 + 12 + 2 = 77$ million are not in the labor force.
Answer: 159 million
Common mistake
Counting every adult without a job as unemployed. Retirees, full-time students and discouraged workers who have stopped looking are outside the labor force. Check: for each person ask, "Did they work for pay? If not, did they look for work in the past four weeks?" Only "no, yes" means unemployed (plus temporary layoffs).