Macro 3 - Unemployment
frictional unemployment
unemployment due to normal turnover in the labor market, such as when people change occupations or are new entrants or due to seasonality of jobs (example: lifeguards)
sam loses his 80k job and takes a part-time job at mcdonalds
unemployment rate remains unchanged because they are still employed. things are worse but UR doesn't show it.
jon has been out of work since last year, becomes discouraged and stops looking for work
if: E (8), UE (2), LF (10), NLF (10), AP (20), RP (5), US P (25) UE goes down by 1, LF goes down by 1 and NLF goes up by one UE before = 20% UR after = 1/9 x 100% = 11.11% unemployment rate falls, but labor market is not improving bc people don't have jobs
sue loses her job and begins looking for a new one
if: employed (8), unemployed (2), labor force (10), not labor force (10), population (20 bc 10+10), rest of population (5), us population (25) UR before sue unemployment = UE/LF x 100% -- 2/10 x 100% = 20% UR after = 3/10 x100% = 30% unemployment rate rises, labor market worsens
labor force
total number of available workers, including the employed and unemployed
unemployment rate
# of unemployed/labor force x 100%
natural rate of unemployment
(Frictional+Structural+Seasonal/ Labor Force)×100
the establishment non-farm payroll survey (ces)
- monthly survey of 300k businesses and government agencies conducted by the BLS
the current population household survey (cps)
- monthly survey of 60k households conducted by the Bureau of Census for the BLS - based on adults (16+)/non-institutional (not jail or hospital or military)/civilian population/full or part time
cyclical unemployment
- unemployment that rises during economic downturns and falls when the economy improves - Cyclical unemployment is associated with the short-run fluctuations of the business cycle, such as unemployment due to a recession when there is insufficient demand for goods and services in an economy. Cyclical unemployment = the Actual Unemployment rate - the Natural Rate of Unemployment
Structural unployment
- usually longer than frictional unemployment - occurs when there is a mismatch between workers and jobs - also occurs when there are more people seeking jobs in a labor market than there are jobs available at the current wage (example: minimum wage) - Unemployment due to structural changes in the economy such as an increase in automation or changes in job skills/training required by employers or an oversupply of workers at the current wage is called structural unemployment.
When new workers join the labor force, and most of them find jobs, the unemployment rate will still rise. True or False?
True
the official unemployment rate
U-3
BLS divides the US adult population into 3 groups
employed: paid employees, self employed, and unpaid workers in a family business unemployed: people not working who have actively looked for work in the last 4 weeks not in the labor force: everyone else
why is the natural rate of unemployment higher than 0%?
even when the economy is doing well, there is always some unemployment
labor force participation rate
labor force/adult population x 100%
frictional unemployment + structural unemployment
the full employment rate of unemployment 5%