Employment and Unemployment Rates as Measures of the Supply and Demand of Labor

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  • The greater the demand and lower the supply, the higher the average wage will be for the local labor market.
  • Unemployment rates take the number of unemployed divided by the total labor pool in a location.
  • We can look at the employment rate to get an idea about where jobs are being added and, therefore, where there is an increase in demand for labor.
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While this movement can lower the unemployment rates in both areas, only the change in employment rates really show where jobs are being added.
Another factor that the current unemployment rate does not tell is how the rate has been changing over time, that is, where the supply of labor has been decreasing.
We can see the large drops in unemployment in the dark green areas in Indiana/Ohio, the western Carolinas, Minnesota, and Utah, in particular.
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