A person who stops looking for work because they are discouraged is not counted in the official unemployment rate.

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Here is the statement to evaluate: 'A person who stops looking for work because they are discouraged is not counted in the official unemployment rate.'

Option 1: True. The official unemployment rate typically counts people who are unemployed, meaning they do not have a job but are actively seeking work or are available to work. A person who has stopped looking for work because they are discouraged is considered out of the labor force, not unemployed, because they are not actively seeking employment. Therefore, such a person is not included in the unemployment count that feeds the official rate.

Option 2: False. This would assert that discouraged workers are included in the official unemployment statistics. The standard measure distinguishes between those who are unemployed (actively seeking work) and those who have given up (not in the labor force). Hence, including discouraged workers would overstate the level of unemployment relative to the conventional definition, making this option incorrect.

Additional nuance: Some broader measures, like the U-6 rate, include discouraged workers as part of a broader measure of underemployment or labor underutilization, but the headline unemployment rate (U-3) excludes them. Understanding this distinction helps explain why the statement is considered true for the official rate, but not for all measures of labor slack.

EC301 Principles of Macroeconomics

A person who stops looking for work because they are discouraged is not counted in the official unemployment rate.

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