Labor is a term that describes the human effort (intellectual or physical) that is put into the creation of goods and services. Labor is commonly used in terms of wage labor, which describes the arrangement under which an individual offers his or her labor to an employer in exchange for a certain wage. In economics, labor is one of the three primary production factors next to capital and land.
The size of a country’s labor force is determined by the size of its working-age population and the labor force participation rate. According to the U.S. Bureau of Labor Statistics, the labor force is comprised of those eligible to work that are either currently employed or actively looking for a job. In 2015, the U.S. labor force was about 159 million people strong. The labor force participation rate in the United States was at 63 percent as of March 2017, which represents the lowest value since the early 1980s when the labor force participation of women was significantly lower than today. In 2016, the labor force participation rate among females in the U.S. was at 56.8 percent. In contrast, about 69.7 percent males participated in the job market.
By definition, the labor force participation rate is only suited to describe the supply of labor to an economy, which is why the employment to population ratio is often used as a secondary indicator to describe the labor market. It describes the share of the working-age population that is actually employed. In 2016, the employment rate in the United States was at 59.7 percent. When the labor force participation rate is higher than the employment rate, it may result in unemployment. The demand for labor is closely tied to the business cycle. When economies are booming, unemployment rates are low. Production is high and labor is in demand. When growth stagnates, companies start cutting costs and job opportunities become scarce. The unemployment rate was at 4.9 percent in the United States in 2016.
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