Jobs and Unemployment

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7
Jobs and Unemployment
CHAPTER
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LABOR MARKET INDICATORS

• So far we have studied measures of macroeconomic
  performance.
• 1)The value of output measured by GDP and GNP
• 2) The cost of living measured by the CPI and the
  inflation rate.
• Next 3) we want to analyze the labor market and
  unemployment.

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Some Definitions

• Labor market data is obtained via the Current
  Population Survey, conducted by the Bureau of
  Labor Statistics (BLS) and the Bureau of the
  Census
• 1) Working-age population is the total number of
  people aged 16 years and over who are not in a
  jail, hospital, or some other form of
  institutional care or in the U.S. Armed Forces.
• 2) The working-age population is segmented by
  those in the labor force and those not in the
  labor force.
• Labor force is the number of people employed plus
  the number unemployed. (i.e working age
  population not including students, retirees,
  persons without and not looking for work. US-154
  mil)

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LABOR MARKET INDICATORS

• A person is counted as employed if during the
  week before the survey
• 1. Worked at least 1 hour in a paid job or 15
  hours unpaid in family business.
• 2. Were not working but who had jobs from which
  they were temporarily absent.
• Counted as unemployed if the person Had no
  employment and
• 1. Had made efforts to find employment during the
  previous four weeks, or
• 2. Were waiting to be recalled to a job from
  which they had been laid off.

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DATA
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7.1 LABOR MARKET INDICATORS

• As economist we want to evaluate the labor
  market.
• Two Main Labor Market Indicators
• Unemployment rate is the percentage of people in
  the labor force who are unemployed.

The number unemployed in Aug 2007 was 7 million.
Guess how much now?
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7.1 LABOR MARKET INDICATORS

• Labor force participation rate is the percentage
  of the working-age population who are members of
  the labor force.

In August 2009, the labor force participation
rate was 65.8 percent.
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7.1 LABOR MARKET INDICATORS

• Defn
• Discouraged worker is 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.
• Ex) In 2005, U.S labor force was 151 million,
  employment was 143 million and the working age
  population is 226.2 million.Canadas labor force
  was 17 million, employment was 15.7 million, and
  the working age population was 25.1 million.
• You are asked to analyze the labor market, which
  country do you think it is harder to get a job?
• Calculate the unemployment rates, and labor force
  participation rate.

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TYPES OF UNEMPLOYMENT

• Unemployment in the economy is created by 4 main
  causes.
• Frictional unemployment is the unemployment that
  arises from people entering and leaving the labor
  force and from the ongoing creation and
  destruction of jobs. (n.b in this case the labor
  demand is still equal labor supply)
• Structural unemployment is the unemployment that
  arises when changes in technology or
  international competition change the skills
  needed to perform jobs or change the locations of
  jobs. (n.b in this case labor demand does not
  equal labor supply)

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TYPES OF UNEMPLOYMENT

• Seasonal unemployment is the unemployment that
  arises because of seasonal weather patterns.
• Cyclical unemployment is the fluctuating
  unemployment over the business cycle that
  increases during a recession and decreases during
  an expansion.
• Defn Full employment is the level of
  unemployment when the cyclical component is zero.
• Natural unemployment rate is the unemployment
  rate when the economy is at full employment.
• Aggregate Hours is the total number of hours
  worked in a year by all employed. ques If the
  of employed people decreases but the average
  hours worked increases. What happens to agg.
  hours?

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• Potential GDP is the level of real GDP that the
  economy would produce if it were at full
  employment.
• Ques If the current unemployment rate is below
  the natural rate, then real GDP must be (above,
  below, equal) to potential GDP.