unemployment exam 2
Person are considered unemployed if (during the survey week)
- Do not have a job - Are available for work - Have actively looked & looked for work during past four weeks (this requirement is very weak..)
OKUN'S Law
- Okun's Law - Arthur Okun quantified the relationship between the shortfall in real output and unemployment. - High unemployment in 1992 left the U.S. $240 billion short of its production possibilities — a loss of $920 of goods and services for every American. - Slow Growth.... - The economy must grow at least as fast as the labor force to avoid cyclical unemployment. - Relationship between the shortfall in output and unemployment. - When you have unemployment of any significance, your economy will have reduced output. Ratio accepted today is 1% of unemployment yields 2% less output. A 2/1ratio then allows economists to put a $$$ amount on the cost of unemployment to the economy.
Bureau Labor Statistics determines Perimeters for unemployment Person over 16 are considered employed if :
- they worked at all for pay or profit even if for an hour - Worked 15 hours or more w/out pay in a family - operated enterprise - Have a job which they did not work during (survey week) due to illness, vacation , industrial disputes, bad weather , time off or personal reasons.
How could one be underemployed?
...
Three basic kinds of unemployment
1. Frictional Unemployment 2. Structural Unemployment 3. Cyclical Unemployment
Who would be not counted as unemployed in the official statics
1/ who stopped looking for work because he or she felt there were no jobs 2/ who did not seek work because she has no transportation 3/ who work only part time job but sought full-time employment ( notice; the 1st two were not in the labor force; and 3rd was employed)
Important economic fact:
As the economy gets close to FULL EMPLOYMENT It is more difficult to obtain further gains in REAL OUTPUT. Continued increasing levels of spending bring about INFLATION
Consensus among Economists says swings due to:
Changes in REAL levels of output and employment brought about by changes in levels of TOTAL SPENDING. Spending Businesses no longer produce at current level Output, employment and income fall In reverse... the opposite results.
Countries Compare
Countries can assess the growth of other countries for means of: Foreign investment Trade potential Currency stabilization
Measure of PARTICIPATION RATE
LABOR FORCE = ------------------------------------ ---------- x 100 POPULATION 16 YEARS OLDER
Measure of UNEMPLOYMENT RATE
UNEMPLOYED = ----------------------------------------- x 100 LABOR FORCE
think about that
Unemployment = 5% (NAtural Rate Unem) Unemployment = 8% (x 2 = 16% less production) Unemployment = 25% (depression era x 2) = 50% less production! Today (2009) = 9.7 x 2 =19.4% less
Discouraged workers
Workers who left the labor force because they could not find the jobs.
New Jobs
The new jobs of tomorrow will require increasing levels of education and skill. And, new type skills no doubt.
unemployment rate
The percentage of the labor force that is unemployed
Structural unemployment
is the unemployment caused by a mismatch between the skills (or location) of job seekers and the requirements (or location) of available jobs. Periods between jobs will be lengthened when the unemployed lack the skills that employers require.
Depression Unemployment
Our greatest failure occurred during the Great Depression, when as much as one-fourth of the labor force was unemployed. The Historical Record Unemployment rates fell dramatically during World War II — the civilian unemployment rate reached a rock bottom 1.2 percent. Since 1950, unemployment rate has fluctuated from a low of 2.8 percent during the Korean War (1953) to a high of 10.8 percent during the 1981-82 recession.
Frictional unemployment
is the brief periods of unemployment experienced by people moving between jobs or into the labor market.
Unemployment
is the inability of labor - force participants to find jobs
The UNEMPLOYMENT RATE
is the proportion of the labor force that is unemployed number of unemployed pople rate = # of unemployment people -------------------------------------------- labor force
Measure of LABOR FORCE
= EMPLOYED + UNEMPLOYED
Underemployment exists
when people seeking full-time paid employment, work only part time, or are employed at jobs below their capability.
Underemployed
workers represent labor resources that are not being fully utilized.
Frictional unemployment differs from other unemployment in three ways:
- Demand is there - Frictionally unemployed have the skills required - Job search relatively short
what is full employment?
- Full employment is not the same as zero unemployment. - The economy strives to reach its potential which means that full employment is essential. When the actual rate of unemployment exceeds the natural rate, the actual output of the economy will fall below its potential. Resources are underutilized (inside production possibility curve.)
How long a person remains unemployed is affected by the nature of the joblessness.
- Job leavers - Job losers - Re- entrance - New entrance
What happens if you can't find work..
- If unemployment persists... workers often give-up looking. - Discourage workers are not counted as part of the unemployment problem after they give up looking for a job. - Some people are forced to take any job available which means...no longer unemployed, but now "underemployed."
How is unemployment measured?
- U.S. Census Bureau survey about 60, 000 households a month to determine how many people are actually unemployed. - A person is considered unemployed if he or she is not employed and is actively seeking a job.
Old Skills
As the skills gap widens, structural unemployment increases. The skills gap is the gap between skills required for emerging jobs and the skills of workers.
Natural Rate of Unemployment NARU
NARU = the difference between full employment and 100% employment. A level of unemployment that will not trigger inflation. i.e. this figure will not bid up wages. The natural rate of unemployment is not a temporary high or low... it is a rate that is sustainable into the future.
Cyclical unemployment
is the unemployment attributable to the lack of job vacancies - i.e., to an inadequate level of aggregate demand. Cyclical unemployment occurs when there are simply not enough jobs to go around. -ocurs during fluctuation in real GDP. Cyclical unemployment rises during period when real GDP falls or grows at a slower-normal rate decreases when the economy improves
Seasonal unemployment
is the unemployment due to seasonal changes in employment or labor supply. What would be an example? At the end of each season, thousands of workers must go searching for new jobs, experiencing seasonal unemployment in the process.
labor force
the total number of workers, both the employed and the unemployed (includes all person over sixteen who are either working for pay or actively seeking paid unemployment) People who are not employed or are not actively seeking work are not considered part of the labor force.