Macroeconomics Midterm 1 - Unemployment

Employment-Population Ratio

(Employment / Working-Age Population) * 100

Labor Force Participation Rate

(Labor Force / Working-Age Population) * 100

Unemployment Rate

(Number of Unemployed / Labor Force) * 100 *Unemployment Level is the Number of Unemployed and Unemployment Rate is the ratio

Alternative Unemployment Rate

(unemployed + discouraged workers) / (labor force + discouraged workers)

Most People are unemployed for...

2 months or less

Not In Labor Force

Criteria: No Job and Not Looking Unavailable for work Available for work

Unemployed

Criteria: Not Working Actively looking for work in the past month (4 weeks)

Employed

Criteria: Work 1+ hours in x week Temporarily from work (vacation can result in 0 hours in x week) 15+ hours in x week working at a family business

Juan lost his job on Wall Street due to a recent financial crisis that affected the entire economy.

Cyclically Unemployed

Kumar was recently laid off from his job due to his company's declining sales revenue caused by the slowdown in the economy.

Cyclically Unemployed

Mackenzie recently graduated but has been unable to find a job due to a slowdown of the economy.

Cyclically Unemployed

Kathrin's sister Melanie, 16, is also a high school school student who works part-time at the same daycare.

Employed

Logan is a member of a local union and is currently not working due to a labor dispute with his manufacturing employer.

Employed

Yushi works 20 hours a week at the local hospital.

Employed

Tyler would like to work full time to support himself and his family, but his employer will not schedule him for more than 20 hours a week.

Employed (Underemployed)

Stephanie is a waitress who has not worked for six weeks because her restaurant is under construction due to a recent hurricane.

Employed Temporary Leave

Bradley is 16 years old and works 20 hours a week unpaid for her father's farm.

Employed 15+ at a family business

Labor Force

Employed + Unemployed Workers in the economy

Seasonal Unemployment

Examples: lifeguards ski instructors

Available for Work

Examples: People who can't work because of responsibilities Discouraged Workers

Unavailable for Work

Examples: homemakers retirees full-time students

Eric is taking a break from his job search. He is not working and has not looked for a job in two weeks.

Frictionally Unemployed

Frank is still looking for work after unsuccessfully applying to 40 jobs.

Frictionally Unemployed

Julie recently graduated with a degree in Finance and sends out ten resumes a day in the hopes of finding a job.

Frictionally Unemployed

Benji works at a theme park that has closed down for the winter. He is currently looking for another job

Frictionally Unemployed (Seasonal)

Minimum Wage laws

Government policy designed to help low-income workers; but raising the wage that firms have to pay will likely result in them hiring fewer workers. Supply decrease Demand increase

Unemployment Insurance

Government policy to help unemployed people find better/higher-paying jobs instead of first-come-first-serve low-paying ones An increase in unemployment insurance payments would in effect, increase the amount of time spent searching for a job which would increase frictional unemployment

Frictional Unemployment

Short-term unemployment that arises from the process of matching workers with jobs Examples: Job-Search Entering/Re-Entering the Labor Force (College Graduation) In between jobs

Paul makes $200,000 a year dealing marijuana.

Unemployed or Not in the Labor Force (Underground Economy)

Full Employment Natural Rate of Unemployment

When all unemployment is due to frictional and structural factors Frictional Unemployment + Structural Unemployment Cyclical Unemployment = 0

Structural Unemployment

a persistent mismatch between the skills and attributes of workers and requirements of jobs re-training

Efficiency Wage

an above-market wage that firms pay in order to increase worker's productivity

Technology (Capital) Compliments

hiring more people to utilize the new technology example: new software coming out and a firm having to hire people who know how to use it and specialize in it

Long Periods of Unemployment lead to...

lower chances of finding a higher paid job greater loss of skill and qualifications

Labor Unions

organizations of workers that bargain with employers for higher wages and better working conditions.

Discouraged Workers

people who can work but don't because they do not believe that any jobs are open to them

GDP gap

potential real GDP - actual real GDP

Technology (Capital) Substitutes

the laying off of more people because technology is cheaper, more effective, and more convenient example: highway-toll booth employees vs. easy-pass cashiers vs. self check-out

Cyclical Unemployment

unemployment caused by a business cycle recession

Technology...

widens the gap between skilled and unskilled workers

Jim stays home cooking, cleaning, and taking care of his home and family.

Not in the Labor Force

Maria could not find a job due to economic slowdown and has decided to attend graduate school instead.

Not in the Labor Force student

Beverly desperately wants a job but has not applied to one in over two months because she believes that none are currently available.

Not in the Labor Force (Discouraged Worker)

Kayla stopped looking for work five weeks ago after sending out thirty resumes and only receiving one interview (after which she did not receive a job offer).

Not in the Labor Force (Discouraged Workers)

Destiny works full time as an active duty marine.

Not in the Working-age population Military

Kathrin, 14, is high school student who works part-time at a daycare.

Not in the Working-age population must be 16 years old

Greg volunteers 30 hours a week at a local soup kitchen.

Not in the labor force volunteer

Underemployed

People who are employed, but not to their desired capacity, whether in terms of hours or skills and expertise Example: part-time vs. full-time employment

Bo lost his job due to new government regulations which required the closure of the local gasoline refinery.

Structurally Unemployed

Jack recently lost his job as an investment broker because more people are making their investment decisions themselves online.

Structurally Unemployed

Niki is currently looking for but cannot find a job. He is either under or over qualified for the jobs in his search.

Structurally Unemployed

The advice to retrain would be the most applicable to which type of unemployment

Structurally Unemployed

Zoe recently lost her job because her company shut down and is moving overseas.

Structurally Unemployed

Potential Real GDP

the estimated GDP of an economy if it were maximizing output and operating at the edge of the production possibilities frontier