The labor force includes everyone who’s either working or actively looking for work. It’s made up of:
- People who are employed
- People who are unemployed but seeking a job
Anyone who’s not looking for work isn’t part of the labor force, like retirees, full-time students not job hunting, stay-at-home parents, or anyone who’s not actively job searching.
Understanding the labor force is key for gauging economic activity and tracking job trends in any area.
What is the difference between the labor force and the workforce?
People often mix up “labor force” and “workforce,” but there’s a difference.
- The labor force includes both the employed and the unemployed who are actively job hunting.
- Workforce refers only to those who are currently employed.
Essentially, if a country has 10 million employed people and 2 million unemployed people actively seeking jobs, the labor force would be 12 million. The workforce would be just the 10 million employed individuals. Understanding this difference is important for analyzing job trends and shaping economic policies.
How is the labor force measured?
The labor force is tracked through surveys and data collection, mostly by government agencies like the U.S. Bureau of Labor Statistics (BLS). The main tool they use is the Current Population Survey (CPS), which gathers data on employment status, job search activity, and demographic details.
Key metrics to measure the labor force include:
- Labor force participation rate: This is calculated by dividing the labor force by the total working-age population and multiplying by 100. It shows how engaged people are in the workforce over time.
- Unemployment rate: This measures the percentage of people in the labor force who are unemployed but actively looking for work.
What is an example of a labor force?
Let’s take the U.S. as an example. If 160 million people are working or actively seeking work, that’s the U.S. labor force.
Now, imagine a small town with 50,000 working-age residents:
- 35,000 are employed
- 5,000 are actively looking for work
In this case, the labor force in that town would be 40,000. Data like this helps businesses, economists, and policymakers make decisions about job creation and economic plans.