Jobs and Unemployment Outline 1.The labor force 2.The labor force participation rate 3.The unemployment rate 4.Sources of unemployment 5.Types of unemployment 6.The social and economic costs of unemployment

Definitions Working-age population: The total number of people aged 16 years and older who are not in jail, hospital, or other form of institutional care. Labor force: The number of people employed plus the number unemployed. Unemployment rate: The percentage of the people in the labor force who are unemployed. Labor force participation rate: The percentage of the working-age population that is in the labor force.

The Current Population Survey counts all persons as unemployed who, during the week before the monthly surveyCurrent Population Survey 1.Had no employment, 2.Were available for work, and either 1. Had made specific efforts to find employment some time during the previous 4 weeks or 2. Were waiting to be recalled to a job from which they had been laid off.

Labor force does not include Discouraged Workers People who are available and willing to work but have not made specific efforts to find a job within the previous four weeks.

Employment statistics for the U.S., June 2003 (in thousands) Thus, the unemployment rate is given by: Source:

Recession is shaded

23.5 million new jobs have were added in the U.S and However, the U.S. lost 2,113,000 jobs between March 2001 and April of 2002.

Recession is shaded

Source: Recessions are shaded

Recession is shaded Source:

Recessions are shaded

Full-time versus Part-time Full-time workers: People who normally work 35 hours or more per week. Part-time workers: people who normally work less than 35 hours per week. Involuntary part-time workers: people who work 1 to 34 hours per week but who are looking for full-time work.

When labor markets weaken, an increasing number of people have to settle for part-time work.

1982 Recession Recession 2001 Recession

1982 Recession Recession 2001 Recession

1982 Recession Recession

Sources of Unemployment Job Losers: People who are fired or laid off from their jobs, either permanently or temporarily. Job Leavers: People who voluntarily quit their jobs. Entrants: People who have just left school and entered the job market are entrants. Reentrants: People who previously held jobs but, then quit and left the labor force and have now decided to look for jobs.

Economists distinguish between four types of unemployment: â Frictional â Seasonal â Structural â Cyclical

I haven’t found a job yet, so I’m frictionally unemployed Ü This type of unemployment is the (unavoidable) product of the movement of human resources between jobs, or into the labor force. I’m a “techie” who is relocating to Dallas because my wife got transferred

RUnemployment arising from the seasonal nature of some economic activities. YConstruction workers in Minnesota unemployed in February. YEmployees of ski resorts unemployed in July.

þThis is unemployment arising from changes in the structure of output or methods of production. Self Service led to the demise of the gas station attendant â Displacement of Delta farm workers as a result of the mechanization of agriculture. â Displacement of draftsmen due the the movement to computer aided design (CAD). â Displacement of auto workers due to car assembly by computer-guided robots. Structural Unemployment

àThis is unemployment due a general contraction in the level of business activity--that is, recession related unemployment I couldn’t find work in 1991, because hardly anyone was building a new home ØAuto and farm equipment workers laid off to to weak sales. ØWorkers in heavy machinery industries laid off because investment spending is soft.

Unemployment is a drag! Unemployment causes stress on individuals and families. Unemployment is correlated with rising incidence of spousal and child abuse, divorce, drug and alcohol use, and crime. The purely economic cost of unemployment is lost physical output, as measured by the GDP Gap

GDP Gap = Potential GDP - Actual GDP, where potential GDP is the the level of output the economy would achieve if the unemployment rate were equal to the Natural Rate of the NAIRU NAIRU is an acronym for “non-accelerating inflation rate of unemployment.” It is the unemployment rate corresponding to zero cyclical unemployment NAIRU is the “full-employment” unemployment rate.

Actual unemployment in was 9.6%. If you assume that the NAIRU was 6%, then we can use Okun’s law to estimate a GDP gap of $352 billion for 1983 (1987 dollars) Okun’s law: each percentage point difference between the unemployment rate and the NAIRU converts to a 2.5 percent GDP gap.

Unemployment and Real GDP