In this section we analyzed the US labor market from 2000 to 2014. We focused on the non-institutional civilian population above the age of 16 who are potential workers. This population can be split into two categories: the civilian labor force, which was approximately 156 million people in 2014, and people out of the labor force, which was approximately 92 million people in 2014. It is important to understand the difference between these two groups to evaluate the unemployment rate, as well as how people move between the groups.
The non-institutional civilian population consists of people who are not in the military or prison, and are at least 16 years of age. This population is composed of potential workers in the American economy. It is split into two categories: the civilian labor force, which is approximately 156 million people in 2014, and people out of the labor force, which is approximately 92 million in 2014.
The labor force is composed of people who either have a job or are actively looking for one. To be considered unemployed, one must not have a job and must be actively looking for one. The unemployment rate is calculated as the fraction of people who are unemployed out of the total number of people in the labor force. In 2014, the unemployment rate was 6% ($\frac{8.8 million}{155.9 million}$). It is important to understand the difference between being in the labor force and out of the labor force: those out of the labor force include retirees, those in school full-time, and stay-at-home parents.
A look at the US labor market from 1996 to 2014 reveals the different flows of people between the different categories. A look at the graph shows a large number of people moving between employment and out of the labor force (3.4 million, on average). This can include retirees leaving employment and recent graduates entering the labor force, among others. There is also a large number of people who move between employment and unemployment (2 million, on average). These typically comprise of people laid off from their job, as well as those who quit. The last row of the graph shows those moving between unemployment and out of the labor force (2 million, on average). These can include people who search for a job but cannot find one and become discouraged, as well as stay-at-home parents who cannot find a job. It is important to note that these flows are very dynamic and explain the variation in the size of the unemployment pool.