P1258779653VuAEz - PowerPoint PPT Presentation

Title: P1258779653VuAEz


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C H A P T E R C H E C K L I S T

• When you have completed your study of this
  chapter, you will be able to

Define the unemployment rate and other labour
market indicators.
Describe the trends and fluctuations in the
indicators of labour market performance in Canada.
Describe the relationships among unemployment,
real GDP, and inflation over the business cycle.
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7.1 LABOUR MARKET INDICATORS

• Labour Force Survey
• Every month, Statistics Canada surveys 54,000
  households to establish the age and employment
  status of members of each household.
• Working-age population
• Total number of people aged 15 years and over.

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7.1 LABOUR MARKET INDICATORS

• The working-age population is divided into those
  in the labour force and those not in the labour
  force.
• Labour force
• The number of people employed plus the number
  unemployed.

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7.1 LABOUR MARKET INDICATORS

• Labour Force Survey Criteria
• The survey counts as employed all persons who,
  during the week before the survey
• 1. Did any work at all for pay or profit
  (including unpaid work for a family business).
• 2. Had a job but were not at work because of
  illness or disability, personal or family
  responsibilities, bad weather, labour dispute,
  or vacation.

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7.1 LABOUR MARKET INDICATORS

• The survey counts as unemployed all persons who,
  during the week before the survey
• 1. Had no employment
• 2. Were available for work,
• and
• 1. Were on temporary layoff with expectation of
  recall, or
• 2. Had actively looked for work during the past
  four weeks, or
• 3. Had a new job to start within four weeks.

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7.1 LABOUR MARKET INDICATORS

• Figure 7.1 shows population labour force
  categories.

The figure shows the data for May 2003.
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7.1 LABOUR MARKET INDICATORS

• Two Main Labour Market Indicators
• The unemployment rate
• The labour force participation rate
• Unemployment rate
• The percentage of people in the labour force who
  are unemployed.

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7.1 LABOUR MARKET INDICATORS

• Labour force participation rate
• The percentage of the working-age population who
  are members of the labour force.

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7.1 LABOUR MARKET INDICATORS

• Discouraged Workers
• Discouraged worker
• A person who does not have a job, is available
  and willing to work, but has not made specific
  efforts to find a job within the previous four
  weeks.

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7.1 LABOUR MARKET INDICATORS

• Part-Time Workers
• Full-time workers
• People who work 30 hours or more a week.
• Part-time workers
• People who work less than 30 hours a week.
• Involuntary part-time workers
• People who work part time but want a full-time
  job.

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7.1 LABOUR MARKET INDICATORS

• Aggregate Hours
• The total number of hours worked by all the
  people employed, both full time and part time,
  during a year.
• In May 2003, 15.8 million people worked an
  average of 35.2 hours per week.
• With 52 weeks a year,
• Aggregate hours 15.8 million 35.2 52
• 28.9 billion.

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7.2 LABOUR TRENDS AND FLUCTUATIONS

• Unemployment

Figure 7.2 shows Canadas unemployment rate
19622002
The average unemployment rate between 1962 and
2002 was 7.7 percent.
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7.2 LABOUR TRENDS AND FLUCTUATIONS

• Types of Unemployment
• Frictional unemployment
• The unemployment that arises from normal labour
  turnoverfrom people entering and leaving the
  labour force and from the ongoing creation and
  destruction of jobs.
• Structural unemployment
• The unemployment that arises when changes in
  technology or international competition change
  the skills needed to perform jobs or change the
  locations of jobs.

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7.2 LABOUR TRENDS AND FLUCTUATIONS

• Seasonal unemployment
• The unemployment that arises because of seasonal
  weather patterns.
• Cyclical unemployment
• The fluctuating unemployment over the business
  cycle that increases during a recession and
  decreases during an expansion.

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7.2 LABOUR TRENDS AND FLUCTUATIONS

• Full Employment
• Full employment
• When there is no cyclical unemployment or,
  equivalently, when all the unemployment is
  frictional, structural, or seasonal.
• Natural unemployment rate
• The unemployment rate at full employment.

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7.2 LABOUR TRENDS AND FLUCTUATIONS

• Figure 7.3 shows that the unemployment rate
  fluctuates around the natural unemployment rate.

The gap between them is cyclical unemployment.
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7.2 LABOUR TRENDS AND FLUCTUATIONS

• Duration and Demographics of Unemployment

Figure 7.4(a) compares the duration of
unemployment at a business cycle peak (1989)
with that at a trough (1992).
The average duration of unemployment varies over
the business cycle.
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7.2 LABOUR TRENDS AND FLUCTUATIONS

• Figure 7.4(b) shows unemployment demographics.

Unemployment rate of 1524 year olds is more than
twice that of people over 25 years.
Unemployment in Atlantic Canada is more than
twice that in the Prairies.
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7.2 LABOUR TRENDS AND FLUCTUATIONS

• The Participation Rate
• The participation rate increased from 59 percent
  during the 1960s to 67 percent during the 1990s.
• Between 1962 and 2002, the participation rate of
• Women increased from 38 percent to 60 percent
• Men decreased from 82 percent to 74 percent.

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7.2 LABOUR TRENDS AND FLUCTUATIONS

• Figure 7.5 shows the labour force participation
  rate of

• Women has increased

• Men has decreased

• Both sexes has increased.

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7.2 LABOUR TRENDS AND FLUCTUATIONS

• Part-Time Workers
• Part-time work is attractive to workers because
  they
• Balance family with work
• Part-time work is attractive to employers because
• Benefits are not paid to part-time workers
• Less government regulation of part-time workers

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7.2 LABOUR TRENDS AND FLUCTUATIONS

• Figure 7.6 shows part-time workers from 1977 to
  2002.

Part-time workers increase in a recession and
decrease in an expansion.
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7.3 MONITORING THE BUSINESS CYCLE

• Real GDP, Potential GDP, and the Output Gap
• Potential GDP
• The level of real GDP that the economy would
  produce if it were at full employment.
• Because the unemployment rate fluctuates around
  the natural rate, real GDP fluctuates around
  potential GDP.
• The gap between real GDP and potential GDP is
  called the output gap.

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7.3 MONITORING THE BUSINESS CYCLE

• Output gap
• Real GDP minus potential GDP expressed as a
  percentage of potential GDP.

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7.3 MONITORING THE BUSINESS CYCLE

• When the unemployment rate is above the natural
  rate,
• Real GDP is below potential GDP.
• The output gap is negative and is called a
  deflationary gap.
• When the unemployment rate is below the natural
  rate,
• Real GDP is above potential GDP.
• The output gap is positive and is called an
  inflationary gap.

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7.3 MONITORING THE BUSINESS CYCLE

• Figure 7.7 shows real GDP, potential GDP, and the
  output gap.

When real GDP is above potential GDP (part a),
there is a deflationary gap (part b).
When real GDP is below potential GDP (part a),
there is an inflationary gap (part b).
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7.3 MONITORING THE BUSINESS CYCLE

• Real GDP, Unemployment, and Inflation
• A relationship exists between the output gap,
  cyclical unemployment, and a change in the
  inflation rate.
• When the output gap is negative (a deflationary
  gap), cyclical unemployment is positive and the
  inflation rate tends to slow.
• When the output gap is positive (an inflationary
  gap), cyclical unemployment is negative and the
  inflation rate tends to speed up.

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7.3 MONITORING THE BUSINESS CYCLE

• Figure 7.8(a) shows the close relationship
  between cyclical unemployment and the output gap.

Figure 7.8(b) shows that inflation tends to
increase when there is an inflationary gap and
decrease when there is a deflationary gap.