Unemployment

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Unemployment

• Measurement Analysis

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2015 Unemployment Rate
Great Recession
On the surface, the unemployment number looks
good, but
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How Is Unemployment Measured?

• The unemployment rate is calculated as the of
  the labor force that is currently unemployed

Labor Force people over 16 with jobs
people looking for jobs
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Calculating Unemployment
Unemployed ----------------------- Labor
Force
8.0/157 5.1
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Why go to College?
Unemployment by education level in 2015 when
overall unemployment 5.1

• Less Than High School 7.7
• High School Graduate 5.5
• Less Than a Bachelors 4.4
• College Graduate (or higher) 2.5

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4-Types of Unemployment

• Structural
• Unemployed skills do not match current demand for
  labor
• Cyclical
• Related to business cycle-----too low a level of
  GDP growth
• occurs during recessions (at trough) or periods
  of slow GDP growth
• Frictional
• Temporarily between Jobs or new to labor force
• Seasonal
• Out of work based on time of year

Govt policy is focused on Structural Cyclical
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Natural Rate of Unemployment

• Definition Unemployment that does not go away
  in long run
• Also called Full Employment (know this!)
• Equals the rate without cyclical unemployment
• Also, total of frictional structural
  (seasonal is adjusted out of number)

Economists debate actual level We will use 4.5
for this class Full employment economy at full
potential
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Unemployment Worksheet
Cyclical
Structural
4-Types of Unemployment
Frictional
Seasonal
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Low Unemployment Inflation
Business competes for workers Wages begin to
increase gt The cost of doing business
rises Leads to cost push inflation
As unemployment rate falls Below full employment
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Calculating Full Employment

• Economists debate actual level
• Was considered to be 5-6 before the 1990s
• 2006 considered 4-5

• Many Reasons
• Improved Job. Info on internet
• Temporary Work Agencies
• New Welfare Laws

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Labor Force Participation Men versus Women
Labor-Force
Participation
Rate (in percent)
100
Men
80
60
40
Women
20
0
1950
1955
1960
1965
1970
1975
1980
1985
1990
2000
1995
2005