Employment and Employment and UnemploymentUnemployment

Employment and Employment and UnemploymentUnemployment

Total Population age 16 and overTotal Population age 16 and over

EmployedEmployedEmployees

Self-employed

UnemployedUnemployedNew entrantsRe-entrantsLost last jobQuit last job

Laid off

Not in Labor ForceNot in Labor ForceArmed forces

Household workersStudentsRetirees

Disabled personsInstitutionalized

Discouraged workers

Civilian labor forceCivilian labor force

UNEMPLOYMENTUNEMPLOYMENT Measurement of Unemployment, Jan 2005Measurement of Unemployment, Jan 2005

Employed

Not inlaborforce

Under 16and/or

institutionalized

TotalTotalPopulationPopulation

Jan 2005 estimateJan 2005 estimate295,412,000295,412,000

Civilian LaborCivilian Laborforceforce

147,979,000147,979,000

70,575,000

76,858,000

Unemployed 7,737,000

140,241,000

Unemployment Unemployment Rate Rate 5.2%5.2%

Labor force Labor force participation participation

raterate65.8%65.8%

If the total population is If the total population is 280 million280 million, and the civilian , and the civilian labor force includes labor force includes 129,558,000129,558,000 with jobswith jobs & & 6,739,0006,739,000 unemployedunemployed but looking for jobs, then the but looking for jobs, then the unemployment rate would be ___%. unemployment rate would be ___%.

Unemployment Rate = Unemployment Rate = UnemployedUnemployedLabor ForceLabor Force

4.94.9

6,739,000 / 136,297,000 x 100 = 4.9%6,739,000 / 136,297,000 x 100 = 4.9%

7,737,0007,737,000

147,979,000147,979,000X100X100 = 5.2%= 5.2%

X 100X 100

1.8 million persons who were marginally attached to the 1.8 million persons who were marginally attached to the labor force in January, about unchanged from a year earlier. labor force in January, about unchanged from a year earlier. • • These individuals wanted and were available to work and These individuals wanted and were available to work and had looked for a job sometime in the prior 12 months.had looked for a job sometime in the prior 12 months. • • They were not counted as unemployed—they did not They were not counted as unemployed—they did not actively search for work in the 4 weeks preceding the survey.actively search for work in the 4 weeks preceding the survey.

Discouraged workers, a subset of the marginally attached, Discouraged workers, a subset of the marginally attached, were not currently looking for work specifically because they were not currently looking for work specifically because they believed no jobs were available for them. believed no jobs were available for them.

• • The number of discouraged workers, at 515,000 in The number of discouraged workers, at 515,000 in January, was slightly higher than a year earlier.January, was slightly higher than a year earlier.

The other 1.3 million marginally attached had not searched The other 1.3 million marginally attached had not searched for work for reasons such as school or family responsibilitiesfor work for reasons such as school or family responsibilities. .

Persons Not in the Labor ForcePersons Not in the Labor Force

Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional – “temporary”, “transitional”, “short-term.”(“between jobs” or “search” unemployment)

Frictional unemployment signals that Frictional unemployment signals that “new jobs”“new jobs” are are available and reflects available and reflects “freedom of choice”.“freedom of choice”.

These are qualified workers “transferable” skills. These are qualified workers “transferable” skills.

Examples:Examples:1.1. People who get People who get “fired”“fired” or or “quit”“quit” to look for a better to look for a better

one.one.2. 2. “Graduates”“Graduates” from high school or college who are from high school or college who are

looking for a job.looking for a job.3. 3. “Seasonal”“Seasonal” or weather-dependent jobs such as: or weather-dependent jobs such as: “ “agricultural”, “construction”, “retail”, or “tourism.” agricultural”, “construction”, “retail”, or “tourism.”

[lifeguards, resort workers, & migrant workers.][lifeguards, resort workers, & migrant workers.]

Three Types of UnemploymentThree Types of UnemploymentStructuralStructural – “technological”“technological” or “long term”“long term”.. basic changes in the “structure”“structure” of the labor force which make certain “skills obsolete”“skills obsolete”..

√ √ AutomationAutomation may result in job losses. Consumer taste may make a good “obsolete”.

• The auto reduced the need for carriage makers.• Farm machinery reduced the need for farm laborers.

√ “√ “Creative destruction”Creative destruction” means as jobs are created, other jobs are lost. Jobs of the future destroy jobs of today.

Frictional and Structural make up the Frictional and Structural make up the “natural “natural rate of unemployment”.rate of unemployment”.

““These jobs do not come back.”These jobs do not come back.”““Non-transferable skills”Non-transferable skills”

– – choice is prolonged unemployment or retraining.choice is prolonged unemployment or retraining.

““These jobs do come back.”These jobs do come back.”

Three Types of UnemploymentThree Types of Unemployment

√ √ Cyclical fluctuations”Cyclical fluctuations” caused by caused by deficient demand deficient demand

for goods and servicesfor goods and services

√ “Durable goods” jobs are impacted the most.

• Purchase of these durables can be postponed

because they can be repaired.

CyclicalCyclical – – “economic downturns” in the business “economic downturns” in the business cycle.cycle.

“Cyclical unemployment” is “real unemployment”.

Survey on UnemploymentSurvey on UnemploymentBLS calls 60,000 households every month. BLS calls 60,000 households every month. They ask They ask three questionsthree questions: : 1.1. Are you working?Are you working? If the answer is If the answer is nono, , 2. 2. Did you work at all this month-even 1 day? Did you work at all this month-even 1 day? You are a member of the LF if You are a member of the LF if “yes”“yes” on 1 or 2. on 1 or 2.

3. 3. Did you look for work during the lastDid you look for work during the last month?month? [agency, resume, interview] [agency, resume, interview]

A A “yes”“yes” counts you as counts you aspart of the part of the LFLF. .

A A “no”“no” means you are means you are not countednot counted. You are a . You are a “discouraged worker.” “discouraged worker.” The labor force consists of the The labor force consists of the employedemployed and and unemployedunemployed. .

Full EmploymentFull EmploymentFull EmploymentFull EmploymentFull employment is less than 100% because the Full employment is less than 100% because the economy is dynamic—frictional and structural economy is dynamic—frictional and structural unemployment are often inevitable.unemployment are often inevitable.

The Full employment rate of unemployment or the The Full employment rate of unemployment or the Natural Rate of Unemployment (NRUNatural Rate of Unemployment (NRU) is present ) is present when the economy is producing its potential output. when the economy is producing its potential output.

NRU is present when the number of job seekers NRU is present when the number of job seekers equals the number of job vacancies. equals the number of job vacancies.

When labor markets are in balance, When labor markets are in balance, there is there is lag time. Workers seeking jobs and lag time. Workers seeking jobs and those those retraining are the cause of the retraining are the cause of the lag.lag. The Natural Rate of Unemployment exists when The Natural Rate of Unemployment exists when

the cyclical unemployment is zero.the cyclical unemployment is zero.

Economists in the 1980’s thought the NRU was 6%. Today, the Economists in the 1980’s thought the NRU was 6%. Today, the figure is figure is 4 to 5%.4 to 5%. Why? Why?

√ √ Fewer workers available as baby boomers age.Fewer workers available as baby boomers age.√ √ Workers find jobs more quickly—the internet is a source of Workers find jobs more quickly—the internet is a source of information.information.√ √ Changes in the welfare system put more people in the labor Changes in the welfare system put more people in the labor force.force.√ √ Doubling of US prison population removes relatively high Doubling of US prison population removes relatively high unemployment individuals from the labor force.unemployment individuals from the labor force.

The NRU is not static; the economy will want to move to The NRU is not static; the economy will want to move to its potential output and cyclical unemployment can its potential output and cyclical unemployment can interfere. When labor markets are tight, firms quickly interfere. When labor markets are tight, firms quickly retrain structurally unemployed and workers who retrain structurally unemployed and workers who previously were not in the labor force come back, the previously were not in the labor force come back, the economy can operate below the NRU.economy can operate below the NRU.

Natural & Actual Unemployment RatesNatural & Actual Unemployment Rates

Europe’s Natural Unemployment Europe’s Natural Unemployment Rate is 8%-11%Rate is 8%-11%

1. Labor unions are stronger1. Labor unions are stronger

2. There are more restrictions on firing workers 2. There are more restrictions on firing workers

which makes employers reluctant to hire them in which makes employers reluctant to hire them in

the 1the 1stst place. place.

3. Much more generous unemployment insurance3. Much more generous unemployment insurance

4. Sweden-(free college); unemployment for 2 4. Sweden-(free college); unemployment for 2

years with 95% pay; and maternity leave is for years with 95% pay; and maternity leave is for

two years.two years.

Another Look at the Natural RateAnother Look at the Natural Rate

Hottest JobsHottest Jobs5 Jobs for Independence5 Jobs for Independence

1. 1. Computer engineerComputer engineer

2.2. System analyst System analyst

3.3. Psychologist Psychologist

4.4. Clinical social Clinical social worker worker

5. 5. Marketing, advertising, Marketing, advertising, public relations managerpublic relations manager

““Econ, Econ”Econ, Econ”

5 Jobs for the Money5 Jobs for the Money1.1.Physician/surgeonPhysician/surgeon ($156,000/$200,000)($156,000/$200,000)

2.2. Airline pilot Airline pilot

($95,794)($95,794)

3.3. Computer Computer engineerengineer

($70,000)($70,000)

4.4.Management consultantManagement consultant

($60,000)($60,000)

5.5. Lawyer($58,000) Lawyer($58,000)

6.6. Teaching - oh!! Teaching - oh!!

In 1960, In 1960, 60%60% of jobs could of jobs could be held by unskilled or be held by unskilled or

semi-skilled workers. semi-skilled workers. Today, it is only Today, it is only 15%.15%.

JOB FACTOID!JOB FACTOID!

Hottest JobsHottest Jobs

These jobs will have the most net gains through 2012 (in 1000’s)These jobs will have the most net gains through 2012 (in 1000’s)

1.1. Teachers K-12Teachers K-12 724,000724,000

2.2. Registered NursesRegistered Nurses 623,000623,000

3.3. Post secondary teachersPost secondary teachers 603,000603,000

4.4. Customer service repsCustomer service reps 458,000458,000

5.5. Computer supportComputer support 420,000420,000

6.6. General Operations ManagerGeneral Operations Manager 376,000376,000

7.7. Sales repsSales reps 356,000356,000

8.8. Truck driversTruck drivers 337,000337,000

9.9. Software engineersSoftware engineers 307,000307,000

10.10. Accountants and auditorsAccountants and auditors 205,000205,000

Hottest JobsHottest Jobs

These jobs will have the most net gains through 2012 (in 1000’s)These jobs will have the most net gains through 2012 (in 1000’s)

1.1. Teachers K-12Teachers K-12 724,000724,000

2.2. Registered NursesRegistered Nurses 623,000623,000

3.3. Post secondary teachersPost secondary teachers 603,000603,000

4.4. Customer service repsCustomer service reps 458,000458,000

5.5. Computer supportComputer support 420,000420,000

6.6. General Operations ManagerGeneral Operations Manager 376,000376,000

7.7. Sales repsSales reps 356,000356,000

8.8. Truck driversTruck drivers 337,000337,000

9.9. Software engineersSoftware engineers 307,000307,000

10.10. Accountants and auditorsAccountants and auditors 205,000205,000 Bureau of Labor StatisticsBureau of Labor Statistics

1.1. Computer EngineeringComputer Engineering $52,169$52,1692.2. Chemical EngineeringChemical Engineering $52,038$52,0383.3. Electrical/Electronics Engineer Electrical/Electronics Engineer $50,566$50,5664.4. Computer ScienceComputer Science $50,543$50,5435. Mechanical Engineering5. Mechanical Engineering $49,400$49,4006. Mgmt Info Sys/Bus. Data Processing6. Mgmt Info Sys/Bus. Data Processing $42,543$42,5437. 7. EconomicsEconomics/Finance/Finance $42,150$42,1508. Civil Engineering8. Civil Engineering $41,067$41,0679. Accounting9. Accounting $42,360$42,36010. Management Info Sys10. Management Info Sys $40,000$40,00011. Teaching11. Teaching $40,600$40,60012. Nursing12. Nursing $37,803$37,80313. Marketing/Marketing Mgmt.13. Marketing/Marketing Mgmt. $36,674$36,67414. Business Admin/Mgmt14. Business Admin/Mgmt $36,515$36,51515. Communications15. Communications $28,000$28,00016. Psychology16. Psychology $27,000$27,000

Top Paying College Majors for 2004Top Paying College Majors for 2004

Fastest Growing Fields Fastest Growing Fields These jobs will add the These jobs will add the largest percentage of positions through 2012largest percentage of positions through 2012

1.1. Network Systems and Communication AnalystsNetwork Systems and Communication Analysts 57%57%

2.2. Physician AssistantsPhysician Assistants 48.9%48.9%

3.3. Software EngineersSoftware Engineers 45.5%45.5%

4.4. Physical Therapist AssistantsPhysical Therapist Assistants 44.6%44.6%

5.5. Fitness TrainersFitness Trainers 44.5%44.5%

6.6. Database AdministratorsDatabase Administrators 44.2%44.2%

7.7. Dental HygienistsDental Hygienists 43.1%43.1%

8.8. Hazardous material removal workersHazardous material removal workers 43.1%43.1%

9.9. Computer Systems analystsComputer Systems analysts 39.4%39.4%

10.10. Environmental EngineersEnvironmental Engineers 38.2%38.2%

Fastest Growing Fields Fastest Growing Fields These jobs will add the These jobs will add the largest percentage of positions through 2012largest percentage of positions through 2012

1.1. Network Systems and Communication AnalystsNetwork Systems and Communication Analysts 57%57%

2.2. Physician AssistantsPhysician Assistants 48.9%48.9%

3.3. Software EngineersSoftware Engineers 45.5%45.5%

4.4. Physical Therapist AssistantsPhysical Therapist Assistants 44.6%44.6%

5.5. Fitness TrainersFitness Trainers 44.5%44.5%

6.6. Database AdministratorsDatabase Administrators 44.2%44.2%

7.7. Dental HygienistsDental Hygienists 43.1%43.1%

8.8. Hazardous material removal workersHazardous material removal workers 43.1%43.1%

9.9. Computer Systems analystsComputer Systems analysts 39.4%39.4%

10.10. Environmental EngineersEnvironmental Engineers 38.2%38.2%

The FEDS Pay Well The FEDS Pay Well Many US Government jobs pay a Many US Government jobs pay a higher average salary than what the private sector pays.higher average salary than what the private sector pays.

(in thousands of (in thousands of dollars)dollars)

FED FED Gov’tGov’tpayspays

Private Private SectorSectorpayspays

11 AstronomerAstronomer $104$104 $86$8622 Financial ManagersFinancial Managers 9494 84843 3 EconomistEconomist 8484 636344 ChemistChemist 8080 575755 Electrical EngineerElectrical Engineer 7676 747466 Public AffairsPublic Affairs 7070 515177 LibrarianLibrarian 6767 545488 Land SurveyorLand Surveyor 6363 595999 NurseNurse 6161 52521010 SecretarySecretary 3737 3131

8 - 23

Economic Growth

The Business Cycle

Unemployment

Inflation

CPI

Redistributive Effects of Inflation

Anticipated Inflation

Effects of Inflation on Output

Key Terms

1997

15

10

5

0

FranceFranceFranceFrance

U.K.U.K.U.K.U.K. GermanyGermanyGermanyGermany

U.S.U.S.U.S.U.S. JapanJapanJapanJapan

1992 2002

GLOBAL PERSPECTIVEGLOBAL PERSPECTIVEUnemployment Rates 5 Industrial Nations

1992 - 2002

Source: Economic Report of the President, 2003Source: Economic Report of the President, 2003