Jobs and Unemployment CHAPTER 6 EYE ONS Aggregate hoursFull employment Labor forceDiscouraged worker Working age populationFull-time worker Unemployment rateInvoluntary part-time worker Cyclical unemploymentPart-time worker Frictional unemploymentPotential GDP Seasonal unemployment Structural unemployment Natural unemployement rate Labor 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 % in June 2009  Labor Force Participation Rate – 65.8% in August % in June 2009 Unemployment rate = Number of people unemployed x 100 Labor force Labor force participation rate = Working-age population x 100 Labor force

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 % - 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 : 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 % 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 College education Technological change in the home Technological change in the workplace  MEN Retired early Remained in full-time education

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. US is in the middle 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

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

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) Your Labor Market Status and Activity

FORMULAS-Chapter 6 Unemployment rate = Number of people unemployed x 100 Labor force Labor force participation rate = Working-age population x 100 Labor force % Change = Original variable x 100 difference between two variables % Change = original/base # x 100 Current # - original/base #