1. Unemployment Measurement & Analysis

2. 2015 Unemployment Rate Great Recession 10.2% 5.1% On the surface, the unemployment number looks good, but……

3. How Is Unemployment Measured? The unemployment rate is calculated as the % of the labor force that is currently unemployed Unemployment Rate = # unemployed Labor force  100 Labor Force = # people over 16 with jobs + # people looking for jobs

4. Calculating Unemployment AdultPopulation (251 million) Labor Force (157 million ) Employed (149.0 million) Not in labor force (94.0 million) Unemployed (8.0 million) 8.0/157 = = 5.1% # Unemployed ----------------------- Labor Force

5. Why go to College? Less Than High School: 7.7% High School Graduate: 5.5% Less Than a Bachelor’s 4.4% College Graduate (or higher) 2.5% Unemployment by education level in 2015 when overall unemployment = 5.1%

6. 4-Types of Unemployment Structural –Unemployed skills do not match current demand for labor Cyclical –Related to business cycle-----too low a level of GDP growth –o ccurs during recessions (at trough) or periods of slow GDP growth Frictional –Temporarily between Jobs or new to labor force Seasonal –Out of work based on time of year Gov’t policy is focused on Structural & Cyclical

7. Natural Rate of Unemployment Definition: Unemployment that does not go away in long run –Also called “ Full Employment ” (know this!) –Equals the rate without cyclical unemployment –Also, total of frictional & structural (seasonal is adjusted out of number…) Economists debate actual % level We will use 4.5% for this class Full employment = economy at full potential

8. 4-Types of Unemployment Structural FrictionalSeasonal Cyclical Unemployment Worksheet

9. Low Unemployment & Inflation As unemployment rate falls Below full employment Business competes for workers Wages begin to increase => The cost of doing business rises Leads to “cost push” inflation

10. Calculating Full Employment Economists debate actual level –Was considered to be 5-6% before the 1990’s –2006 considered 4-5% We will use 4.5% for Natural rate (Full Employment) Critical Thinking: Why is it lower today? Many Reasons: Improved Job. Info on internet Temporary Work Agencies New Welfare Laws

11. Labor Force Participation: Men versus Women 100 80 60 40 20 0 1950195519601965197019751980198519902000 Labor-Force Participation Rate (in percent) Women Men 1995 2005