Macro Chapter 7

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Macro Chapter 7

• Presentation 2

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Labor Force

• The labor force consists of people who are
  willing and able to work
• Both those employed and those unemployed but
  seeking work are counted

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Unemployment Rate

• Random monthly survey of 60,000 people conducted
  by the Bureau of Labor Statistics (BLS)
• Use the results of the survey to determine the
  unemployment rate for the nation

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Unemployment Rate Calculated

• Unemployed percentage of the labor force
  unemployed
• Unemployment rate unemployed/labor force x 100

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Unemployment Rate Contd.

• The BLS splits the population into 3 groups
• 1. People under the age of 16 and people who are
  institutionalized (prison, psych hospitals)---
  not counted in the labor force
• 2. Not in the labor force- adults who are
  potential workers that are not seeking work (ex.
  Homemakers, full-time students, retirees)
• 3. Labor Force- counted

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Issues / Flaws with Unemployment

• Discouraged Workers not included
• Gave up looking, but would still like to work
• Underemployed
• Working part time or working in a job with a
  lower skill level than they possess
• Part-Time Workers- counted as employed some by
  choice some due to lack of demand

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Types of Unemployment

• 1. Frictional Unemployment
• Unemployment which occurs from people moving
  between jobs, careers, or locations

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2. Structural Unemployment

• Mismatch of workers and job openings
• Unemployed people lack the skills or education,
  or geographically are misplaced
• Ex- jobs moving from the Rust Belt to the Sunbelt

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3. Cyclical Unemployment

• Occurs from changes in the Business Cycles
  (recession, depression)
• Lay-offs due to a decrease in demand for
  goods/services

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4. Seasonal Unemployment

• Change in hiring patterns due to the time of year
• Ex- Ski Instructors, Lifeguards, Landscapers

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Full Employment

• Exists when there is structural, frictional, and
  seasonal unemployment but no cyclical
  unemployment

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Full Employment Rate (Natural Rate of
Unemployment)

• The economy is producing at its potential output
• The number of job seekers matches the number of
  jobs available
• Appx. 4-5

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Nominal Income

• Number of dollars received as wages, rent,
  interest or profits

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Real Income

• A measure of the amount of goods and services
  nominal income can buy
• The purchasing power of nominal income
• Income adjusted for inflation
• Real Income nominal income/price index (in
  hundredths)

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Real Income Contd.

• change in real income change in nominal
  income - change in price level
• Ex- price level rises by 6. If Bills nominal
  income goes up by 6, real income is unchanged.
  If nominal income goes up by 10, real income
  will go up by 4 etc.