jobs and unemployment chapter 6 eye ons aggregate hoursfull employment labor forcediscouraged worker...

Jobs and Unemployment CHAPTER6EYE ONS

Aggregate hours Full employmentLabor force Discouraged workerWorking age population Full-time workerUnemployment rate Involuntary part-time workerCyclical unemployment Part-time workerFrictional unemployment Potential GDPSeasonal unemploymentStructural unemploymentNatural unemployement rateLabor force participation rate

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

Labor Force Participation Rate – 65.8% in August 2007

65.7% in June 2009

Unemployment rate =

Number ofpeople unemployed

x 100Labor force

Labor force participation rate = Working-age population

x 100Labor force

LABOR MARKET INDICATORSWorker 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


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


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 RateWOMEN

•College education

•Technological change in the home

•Technological change in the workplace

MEN•Retired early

•Remained in full-time education

Unemployment Around the WorldAll 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

•Structural – Changes in Technology or International Competition

• New technology eliminates jobs

• Jobs are relocated or outsourced to other areas

•Seasonal – Seasonal weather patterns

• Construction, Farming, Fruit gatherers

•Cyclical – Fluctuates with business cycle

• Auto worker laid off during recession

Influenced by unemployment compensation

•Harder, especially on older people•Last longer – skills

•Increases in Winter•Decreases in Spring

•Increases in recessions•Decreases in expansions


Duration and Demographics

Notice Teenager

Rates

Notice Female Rates


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 Rate fluctuates around the

Natural Unemployment RateReal GDP fluctuates around Potential GDP

When unemployment rate is BELOW the natural rate

Real GDP is above Potential GDP

Output Gap = RGDP - PGDPOutput Gap = RGDP - PGDP

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?


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?


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 ofpeople unemployed

x 100Labor force

Labor force participation rate = Working-age population

x 100Labor force

% Change =

Original variablex 100

difference between two variables

% Change =

original/base #x 100

Current # - original/base #

jobs and unemployment chapter 6 eye ons aggregate hoursfull employment labor forcediscouraged worker...

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