Employment Rate Calculator
How is Employment Rate Calculated?
Understanding labor market statistics can be challenging because different organizations use different definitions for "employment rate." Generally, there are two primary ways this metric is calculated and interpreted by economists and government bodies like the Bureau of Labor Statistics (BLS) or the OECD.
1. Employment Rate (Share of Labor Force)
In many contexts, the employment rate is looked at as the inverse of the unemployment rate relative to the active labor force. The Labor Force consists of all individuals who are currently employed plus those who are unemployed but actively seeking work.
Employment Rate = (Employed Persons / Labor Force) × 100
For example, if a town has 950 employed people and 50 unemployed people looking for work:
- Labor Force: 950 + 50 = 1,000
- Employment Rate: (950 / 1,000) × 100 = 95%
2. Employment-to-Population Ratio
The Employment-to-Population Ratio is often what economists refer to when discussing the "Employment Rate" in a broader macroeconomic sense. This metric compares the number of employed people to the total Working Age Population (usually defined as civilians aged 15-64 or 16+ who are not institutionalized).
This metric is often considered a better indicator of an economy's ability to create jobs because it is not affected by people dropping out of the labor force (giving up on finding work).
Using the previous example, if the town has a total working-age population of 1,500 (meaning 500 people are students, retired, or not looking for work):
- Employed: 950
- Population: 1,500
- Ratio: (950 / 1,500) × 100 = 63.33%
Why the Difference Matters
The standard unemployment rate (and its inverse, the labor-force based employment rate) can sometimes be misleading. If many people stop looking for work due to economic discouragement, they leave the labor force. This lowers the unemployment rate mathematically, making the economy look better, even though fewer people are actually working.
The Employment-to-Population ratio captures this decline, as the population number remains stable regardless of whether individuals are actively seeking work or not.
Key Definitions
- Employed: Persons who did any work for pay or profit during the survey reference week.
- Unemployed: Persons who do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.
- Not in Labor Force: Retired persons, students, those taking care of children or other family members, and others who are neither working nor seeking work.