"The unemployment rate in the city of Gotham for the year 2014 is 5%.". Do you think the unemployment statistic for the city of Gotham is accurate? Explain your answer with proper reasons

Answer 1

The unemployment statistics simply reflect if someone is unemployed. It does not provide any information on the reason for unemployment or whether those who are employed are employed part time or are in positions for which they are overqualified. Here are some examples where the unemployment statistics are not perfect.
Michael has a job doing yard work and cleaning houses but does not report the income. He reports that he is unemployed, although he really is employed. Michael's failure to report his work biases the unemployment rate upward.
Erin reports that she is ready to work and is looking for a job, but she really is not that eager to work and so she does not look very hard for a job. She is counted as unemployed but would more accurately be classified as out of the labor force. This situation causes an upward bias in the unemployment rate.
Kayla is paid for twenty-five hours of work a week. She would accept a full-time job if she could find one. Although such a person is considered employed, the unemployment rate understates the economy's productive capacity when people who prefer full-time employment work only part-time.