How do they calculate unemployment?
In order to take unemployment the government randomly surveys households. They ask if the people have a job. If a person says no they will ask if the person is looking for a job.
If the person answers yes they are put into unemployment.
If the person answers no they are put into the discouraged worker category and they are not counted towards unemployment.
Say there are 10 adults who are able to work. Our labor force would be 10. Now lets say 5 adults have a job. This is not our employment rate yet.
Now lets say 5 adults don't have a job but only 2 are looking for a job.
3 people are discouraged workers.
To find employment we would take employed workers over employed and unemployed workers so 5/7 (not counting the 3 discouraged). Therefore unemployed would be 2/7.