Macroeconomics

Lecture 12

Unemployment

Questions

Exam 2 Review

Exam 3 Thursday

November 17

Unemployment

The Monetary System

Money Growth and Inflation

Unemployment

Intellectual

Financial Physical

Human

Culture

Entrepreneur

trust knowledge skills personality health relationships

natural resources time buildings equipmentthings than make things

money and risksavers and borrowers time is money

(1+r)n

insurance   limited liability corporations

ideas technologymethods

Key Termslabor forceunemployment ratelabor-force participation ratenatural rate of unemploymentcyclical unemploymentdiscouraged workersfrictional unemployment

structural unemploymentjob searchunemployment insuranceunioncollective bargainingstrikeefficiency wages

Unemployment

How is it measured?Who measures it?

Adult Population

Population age 16 and older

Labor Force

the total number of workers, including

employed and unemployed

Labor ForceParticipation Rate

the percent of the adult population that is in the

labor force

Unemployment Rate

the number of the labor force that is

employed

Employedpaid employees

work in own businessunpaid workers in family business

full-time and part-timejobs but temporary absence

Unemployednot employed

availabletried to find a job in the last four

weekswaiting to be recalled from layoff

Discouraged Workers

People who would like to work but have given

up looking for a job

Not in Labor Forcenot employed or unemployed

discouraged workersfull-time student

homemakerretiree

Unemployment Rate

The percentage of the labor force that is

unemployed

16+79%

Under 1621%

U.S Population

millions %

Under 16 66 21%

16+ 254 79%

Total 320 100%

Unemployed 7.7 million3%

Employed 152.3 million60%

Not in Labor Force 94 million37%

Adult Population

Unemployed 7.7 million5%

Employed 152.3 million95%

Labor Force

millions%

Population %

Adults% Labor Force

Population 320 100%

Age under 16 66 20%

Age 16+ 254 80% 100%

Not in Labor Force 94 30% 37%

In Labor Force 160 50% 63% 100%

Employed 152.3 47.6% 60% 95.2%

Unemployed 7.7 2.4% 3% 4.8%

Bureau of Labor Statistics - Two Surveys

The Current Population Survey (CPS) "household survey" Sample of 60,000 households.

The Current Employment Statistics Survey (CES): "payroll survey" sample of 160,000 businesses and government agencies that represent 400,000 individual employees.

Who Measures Unemployment?

U1: the percentage of labor force unemployed for 15 weeks or longer.

U2: the percentage of labor force who lost jobs or completed temporary work.

U3: the official unemployment rate that occurs when people are without jobs and they have actively looked for work within the past four weeks.

U4: the individuals described in U3 plus "discouraged workers," those who have stopped looking for work because current economic conditions make them think that no work is available for them.

U5: the individuals described in U4 plus other "marginally attached workers," "loosely attached workers," or those who "would like" and are able to work, but have not looked for work recently.

U6: the individuals described in U5 plus part-time workers who want to work full-time, but cannot due to economic reasons, primarily underemployment.

Six Measures of Unemployment

Labor-Force Participation Rate

The percentage of the adult population (15+)

that is in the labor force

ProblemsOverstate - Above actual

Cash workers

Understate - Below actualDiscouraged workers

Civilian labor force by sex1948-2015 annual averages

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015Year

0

20,000

40,000

60,000

80,000

Num

ber i

n th

e civ

ilian

labo

r for

ce (i

n th

ousa

nds)

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015Year

0

20

40

60

Shar

e of

the

civilia

n la

bor f

orce

(%)

Select Year Range1948 to 2015

WomenMen

Hover over chart to view data.Adjust year range to changedata display.

Notes: Includes persons in thecivilian noninstitutional populationthat are employed or activelylooking for work. Based onpersons 16 years of age and older.The comparability of historicaldata has been affected at varioustimes by methodological and otherchanges in the Current PopulationSurvey.

Source: 1948-2015 annualaverages, Current PopulationSurvey, U.S. Bureau of LaborStatistics

Graph by the Women's Bureau, U..

Men

Women

Natural Rate of Unemployment

The normal rate of unemployment around

which the unemployment rate fluctuates

Cyclical Unemployment

The deviation of unemployment from its

natural rate

Unemployment

FrictionalSeasonalStructural