Jobs and Unemployment CHAPTER 6 EYE ONS Aggregate hoursFull employment Labor forceDiscouraged worker Working age populationFull-time worker Unemployment.
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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
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
LABOR MARKET INDICATORS
Part-time Workers•Part-time jobs remain STEADY across the business cycle
•Involuntary Part-time workers FOLLOW the business cycle
LABOR MARKET INDICATORS
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
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
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 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?
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
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