The relationship between changing of labor force(total labor number ) and Unemployment rate - Research Paper Example

A study by Hornstein defined labor force participation as the number of people who are eligible to work. In many countries, a noted in a study by Meyer, labor force is often calculated monthly. Additionally, the same study indicates that when workforce increases, unemployment declines (Meyer). During the economic recession, the unemployment rate rose rapidly, from approximately 4% in 2007 to 10% in 2009 (Conrad). However, since the economies have been improving, the unemployment rate has been reducing gradually.

After four years of the recession, unemployment has been at 7% (Conrad). At the same time, participation in the labor force has been declining steadily over the same time. It now stands at 63%, the same level it was in the 1980s. A study by Elmeskov noted that the decline in the labor force participation indicates that the unemployment rate is going to reduce, but slowly. This means that there is a relationship between labor force and unemployment rate. Economic experts predict that if the labor market improves many people who have left their jobs will return and contribute to the pool of the unemployed.

In this case, the number of unemployed persons will reduce, and the labor force participation will increase (Elmeskov). A number of studies have demonstrated an adverse correlation between the unemployment rate and the workforce participation (Boesler; Hornstein; Toossi). The authors of these studies argue that when unemployment rate declines, the labor force participation increases. This paper agrees with these studies because indeed, there is a negative correlation between the unemployment and the labor force participation.

A study by Hornstein noted that the potential workforce is categorised into three groups. These are the employed, the unemployed, and the inactive workforce. The inactive workforce is individuals who