Transcript Ch6

Jobs and Unemployment
CHAPTER
6
EYE ONS
Aggregate hours
Labor force
Working age population
Unemployment rate
Cyclical unemployment
Frictional unemployment
Seasonal unemployment
Structural unemployment
Natural unemployement rate
Labor force participation rate
Full employment
Discouraged worker
Full-time worker
Involuntary part-time worker
Part-time worker
Potential GDP
The Current Population Survey
Conducted by:
1,600 field interviewers and supervisors of the
•The Bureau of Labor Statistics and
•Bureau of the Census
Each month every field interviewer
•Contacts 37 households
•Asks basic demographic questions about
all persons living at the address
•Detailed labor force questions about
persons aged 15 or over.
The Current Population Survey
Once a household is selected:
•They are questioned for 4 consecutive months
•And again for the same 4 months a year later.
Each month:
•Addresses that have been surveyed 8 times are removed
•6,250 new addresses are added.
These rotations and overlap of households:
•Provide very reliable information
•About both monthly and yearly changes in the labor market.
POPULATION SURVEY
Group 1
•Working Age Population
• Age 16+, not institutionalized (jail, hospital, mental, military)
•Everyone else
Group 2
•In the Labor Force
• Employed + Unemployed = Labor Force
•Not in the Labor Force
• Retired, in school, couch potatos
Group 3
•Employed
•Unemployed
POPULATION SURVEY
Employed
1. Paid – Worked at least 1 hour
Unpaid – Worked at least 15 hours
OR
2. Did not work BUT had jobs from which they were
TEMPORARILY LAID OFF
Unemployed
1. Had no employment
2. Were available for work
AND
1. Had applied for a job within the last FOUR WEEKS
OR
2. Were waiting to be recalled to a job from which they were
LAID OFF
POPULATION SURVEY
June 2009 Data
LABOR MARKET INDICATORS
Unemployment Rate – 4.6% in August 2007
9.5% in June 2009
Unemployment rate =
Number of
people unemployed
x 100
Labor force
Labor Force Participation Rate – 65.8% in August 2007
65.7% in June 2009
Labor force
participation rate =
Labor force
Working-age population
x 100
LABOR MARKET INDICATORS
Worker Classifications
•Discouraged Workers
• Has not made an effort to find a job in last 4 weeks
• Not included in unemployment or labor force rates
•Full-time Workers
• Work 35+ hours a week
•Part-time Workers
• Involuntary (part-time for economic reasons)
• Desire a full-time job
• Voluntary
• Choose to work part-time
Aggregate Hours
•Total number of hours worked by all people in a year
LABOR MARKET INDICATORS
Part-time Workers
•Part-time jobs remain STEADY across the business cycle
•Involuntary Part-time workers FOLLOW the business cycle
Alternative Measures of Unemployment
Part-Time Workers: old verse new method
LABOR MARKET INDICATORS
Aggregate Hours
•Between 1967 and 2007
• 96% - Increase in number of people working (almost double)
• 75% - Increase in aggregate hours
• Due to shorter work weeks – People work less hours each week on average
Fluctuations Follow
Business Cycle
Labor Market in the Great Depression
•1929-1939: The Great Depression
•1933: The worst year
•real GDP fell 30%
•1in 4 people could not find work.
LABOR MARKET TRENDS
Unemployment
•5.9% - Average Unemployment between 1967 and 2007
• 3.9% in 60’s: Vietnam War and spending due to social programs
• Low in Late 90’s: Technology sector
• High in 70’s & 80’s: World oil price (1982 recession – almost 10%)
•Increases in recessions and Decreases in expansions
Unemployment Rate
LABOR MARKET TRENDS
Participation Rate
WOMEN
MEN
•College education
•Retired early
•Technological change in the home
•Remained in full-time education
•Technological change in the workplace
Unemployment Around the World
All of the countries with higher unemployment rates
than the U.S. rate also have higher unemployment
benefits and more regulated labor markets.
The newly
industrializing
countries of
Asia have lower
unemployment
rates.
Differences in
unemployment
rate were much
greater during
the 1980s and
1990s than in
the 2000s.
Women in the Labor Force
•Women labor force participation rates in most advanced countries
has increased since the 1960s
•Level of participation varies a great deal among nations
•Cultural factors play a role
•But, economic factors such as education dominate culture
UNEMPLOYMENT: SOURCES and TYPES
Sources of Unemployment
•Job Losers – Laid off
•Job Leavers – Voluntarily quit
•Entrants and Reentrants – Graduate or Reenter Labor Force
Sources of ‘Ending Unemployment’
•Hires – Were unemployed but FOUND A JOB
•Recalls – Were temporarily laid off but WERE CALLED BACK
•Withdrawals – Stop looking for a job
UNEMPLOYMENT: SOURCES and TYPES
Types of Unemployment
•Frictional - Normal Labor Turnover
• People entering and leaving
• Job creation and destruction
Influenced by unemployment
compensation
•Structural – Changes in Technology or International Competition
• New technology eliminates jobs
• Jobs are relocated or outsourced to other areas
•Harder, especially on
older people
•Last longer – skills
•Seasonal – Seasonal weather patterns
• Construction, Farming, Fruit gatherers
•Increases in Winter
•Decreases in Spring
•Cyclical – Fluctuates with business cycle
• Auto worker laid off during recession
•Increases in recessions
•Decreases in expansions
UNEMPLOYMENT: SOURCES and TYPES
Duration and Demographics
Notice
Teenager
Rates
Notice
Female
Rates
UNEMPLOYMENT: SOURCES and TYPES
Full Employment = Natural Unemployment
•Achieved when there is NO CYCLICAL UNEMPLOYMENT
Potential GDP
•Level of GDP that would be produced IF the economy were at Full
Employment
Unemployment Rate
Fluctuates Around the
Natural Unemployment Rate
UNEMPLOYMENT: SOURCES and TYPES
Unemployment Rate  fluctuates around the
Natural Unemployment Rate
Real GDP  fluctuates around Potential GDP
When unemployment rate is BELOW the natural rate 
Real GDP is above Potential GDP
Output Gap = RGDP - PGDP
Your Labor Market Status and Activity
Do you plan to one day find a job?
You will most likely have SEVERAL jobs/careers.
You LOOK for job, GET a job, QUIT a job, GET a NEW job,
you will pass through many of the population categories
used in the Current Population Survey.
Your Labor Market Status and Activity
Think about your current labor market status while you are
studying economics:
• Are you in the labor force or not?
• If you are in the labor force, are you employed or
unemployed?
• If you are employed, are you a part-time or a full-time
worker?
Your Labor Market Status and Activity
Now think about someone you know who is unemployed or
who has been unemployed.
Classify the unemployment experienced by this person as
• Frictional
• Structural
• Seasonal
• Cyclical
How can you tell the type of unemployment experienced by
this person?
Your Labor Market Status and Activity
The labor market conditions that you face today or when you
graduate and look for a job depend partly on general national
economic conditions—on whether the economy is in recession
or booming.
But the labor market conditions also depend on where you live.
How quickly you find a job depends on:
•Willingness to move
•Ability to prepare a resume (get an interview)
•Ability to interview (select a compatible job)
FORMULAS-Chapter 6
Unemployment rate =
Number of
people unemployed
x 100
Labor force
Labor force
participation rate =
Labor force
Working-age population
% Change = difference between two variables
Original variable
% Change =
Current # - original/base #
original/base #
x 100
x 100
x 100