FIN 403 Midterm
Discouraged workers
"Discouraged workers" are a specific subset of marginally attached workers. BLS defines discouraged workers as persons not in the labor force who want and are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months), but who are not currently looking for a very specific reason: they believe there are no jobs available for them or there are none for which they would qualify.
Compute the ratio of job openings from Dec. 2022 divided by the number of unemployed in Jan. 2023.
11.0 million openings divided by 5.694 million unemployed yields a ratio of 1.93.
What is happening with initial claims right now?
4 week moving average and initial claims are both going down
When can you identify a skills gap ?
5.694 million people were unemployed in Jan. 2023. Yet, there are 11.0 million job openings currently. Thus, unemployed people are likely to be lacking the skills needed to get hired by firms that have job openings, known as a "skills gap". With that many job openings, there is likely almost no cyclical unemployment right now. There is always some frictional unemployment, as discussed above, but this evidence of a skills mismatch shows that there are many structurally unemployed.
Why do we use a 4-week moving average instead of a single data point?
A 4-week moving average is a commonly used method to smooth out short-term fluctuations and provide a more accurate representation of the underlying trend. This approach is used in a variety of economic indicators, including employment data, stock prices, and consumer confidence.
Customs Union
A customs union is a form of regional economic integration in which member countries not only eliminate internal trade barriers, but also adopt a common external tariff on goods imported from non-member countries. This means that member countries no longer have independent trade policies towards non-members, and the external tariff is set at a common level by the customs union.
Show how the total production of both products under free trade can exceed the total production of each under autarky (no trade). Then show how free trade can allow each nation to consume more of each good than under autarky.
A number of possible correct answers exist. But all correct answers will follow these two guidelines. First, the nation without absolute advantage should totally specialize toward its comparative advantage. Thus, Vietnam will put both workers on cameras. Second, the nation that has the absolute advantage in both will partly specialize toward its comparative advantage. South Korea will mainly make iPads, yet to make an example where the world has more of everything, South Korea will incompletely specialize and put part of a worker on cameras. Obviously, Vietnam is not making any iPads, so must trade for some at a terms of trade within the range portrayed in Part C above. Now, you can play with the numbers to get a correct solution. Put both workers in Vietnam on cameras - then Vietnam makes 28 x 2 = 56 cameras. In Part D above, we saw that no trade led to a total of 64 cameras, so also put 0.5 of a Korean worker on cameras. We use this incomplete specialization to create an example where the world produces more of everything. The Korean worker would make 0.5 of 36, or 18, cameras. Thus, the world produces a total of 74 (56 + 18) cameras. Put the remaining 1.5 Korean workers on iPads; thus the world has 12 x 1.5 = 18 iPads. This is more than the original 16 iPads in Part D above. Clearly, we now have more of both goods than in the no-trade situation seen in Part D above. Now show how trade can allow both nations to consume more of each product than under the initial no trade situation. Vietnam produced no iPads, but it can import 5 from South Korea in exchange for exporting 25 cameras to South Korea. Note that we selected a terms of trade (relative price for trading) of 5, which is the midpoint of the feasible range, but you could make a problem work using some other number in the range. In this case, Vietnam now has more iPads (0 + 5 = 5 vs. 4) and more cameras (56 - 25 = 31 vs. 28) than if no trade. Additionally, South Korea also has more cameras (18 + 25 = 43 vs. 20) and more iPads (18 - 5 = 13 vs. 12) than no trade. A detailed example here, showing more of everything for everyone. The key is to show that each nation now has MORE iPads and MORE cameras (following specialization and trading) than under autarky.
Continued claim
After filing an initial claim and experiencing a week of unemployment, a person then files a continued claim to claim benefits for that week of unemployment. Continued claims are also referred to as insured unemployment. States usually pay claims for up to a maximum of 13 weeks, if the person still is unemployed. Thus, the number of continuing claims far exceeds the number of initial claims.
multilateral agreement
An agreement negotiated between more than two countries or groups of countries at the same time
Initial claim
An initial claim is a claim filed by an unemployed individual after a separation from an employer, requesting determination of eligibility for the UI program.
Who is the USA's largest trading partner?
As of 2021, China is the largest trading partner of the United States by volume. In 2020, the total value of trade (exports plus imports) between the US and China was approximately $559 billion, according to the US Census Bureau. However, it's worth noting that the ranking of top trading partners can fluctuate depending on various economic and political factors, and other countries such as Canada, Mexico, and Japan have also been major trading partners of the US in recent years.
Marginally attached workers
BLS defines "Marginally attached workers" as persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Marginally attached workers include those who did not actively look for work in the prior 4 weeks for such reasons as school or family responsibilities, ill health, and transportation problems, as well as those for whom a reason for nonparticipation was not determined.
How much is China responsible for the USA's goods trade deficit? How much is the rest of the world responsible?
China used to be responsible for roughly 50% of the USA's good trade deficit in 2018, now it's roughly 33% Now the USA's trade deficit is with the rest of the world (roughly more than $850 billion)
Employment Population Ratio (E-POP Ratio) Formula
Civilian Employment-Population Ratio = E-POP = the percent of POPr actually employed. E-POP = E / POPr Therefore, E-POP also equals [1-Ur] x LFP%
Complete specialization
Complete specialization, where countries or firms focus all of their resources and efforts on producing a single product or a narrow range of products in which they have a comparative advantage. Complete specialization can be advantageous as it can lead to greater efficiency and productivity gains, as well as lower costs and prices.
What industries were affected during the Great Recession?
Construction and manufacturing AKA a "man-cession"
Are foreclosures pro-cyclic or counter-cyclic?
Counter-cyclic
Are insurance claims pro-cyclic or counter-cyclic?
Counter-cyclic
Are the number of unemployed people at a time pro-cyclic or counter-cyclic?
Counter-cyclic
Is the unemployment rate pro-cyclic or counter-cyclic?
Counter-cyclic
Counter-cyclic
Counter-cyclic indicators move in the opposite direction of the economy. That is, when the economy is growing, these indicators will become more negative or shrink. Correspondingly, counter-cyclic indicators will rise or move up when the economy is shrinking or undergoing recession
Cyclical unemployment
Cyclical unemployment is unemployment that occurs due to the normal business cycle fluctuations; that is, people temporarily laid off during an economic downturn. cyclical unemployment spiked during the pandemic, as business and the economy came crashing down. Today, cyclic unemployment has largely disappeared.
Guest Speaker 1: Ben Bubnovich (Delta - Head of International Networks) info
Delta Airlines Presentation COVID Impacts At Delta's worst, it was burning over $100M in cash every day Sometimes closer to $125M Airlines adapted in 2020 to fill a niche in the cargo market Delta pivoted to cargo-only demand Airlines also began to retire iconic, yet fuel-inefficient planes (i.e. Boeing 747) Delta in 2022 Made $2.7B in pre-tax income in 2022 Roughly half of their all-time high pre-tax rev in 2019 Post-COVID Travel Trends Leisure travel is starting to deconcentrate from certain holidays, weekends, etc. Business travel "curve shifting" Business travel was typically inelastic Drove pricing and inventory strategies Rise in blended leisure and business travel Ex. work-from-home opportunities
Guest Speaker 2: Andrew Bate (Safely) info
Does any kind of P2P interactions / rentals along with homes Safely provides renters $1M of embedded commercial insurance Integrated it with a property management system (PMS) Safely didn't experience the same revenue dip that the airline industry faced Really only a 3 week period
Examples of customs union
EU, Mercosur
When did US imports from China peak? Why?
Even though the US has a surplus in services, it doesn't offset the overall deficit with China. US imports are higher in 2022, and peaked in Q1 of 2022, because of inventory and e-commerce (imported a lot from China)
What does the measure "Exports and Imports as a % of GDP" tell us about a nation? What nations have exports and imports over 100%
Exports and Imports as a percent of GDP is a measure of the 'openness' of a nation to global trade; in other words, how connected it is to the global economy. This measure also provides information about the size of the domestic economy. Overall, the measure "Exports and Imports as a % of GDP" can provide valuable insights into a nation's economic structure, openness, trade balance, and vulnerability to external shocks. Ireland, Singapore, Hong Kong
Why is the ratio of job openings from Dec. 2022 divided by the number of unemployed in Jan. 2023 important to Chairman Powell and what is he inferring from it?
Fed Chairman Powell considers this ratio important because it provides insight into how tight or slack the U.S. labor market is. In other words, it reveals the relationship between labor demand (job openings) and labor supply (unemployed people). A ratio of 1.0 means there is a job available for every unemployed person. Ratios greater than 1.0 signal tighter labor markets in which firms have more job openings than there are people looking for work. In contrast, ratios less than 1.0 indicate slack in the labor supply, as more unemployed people compete for each job opening. Powell is inferring therefore that the job market is currently very tight. Note that the current ratio of close to two is very near historic record height.
As of January 2023, how many marginally-attached workers, discouraged workers, and part-time workers for economic reasons are there?
For Jan. 2023, the number of people in thousands for each category is as follows. Marginally-attached workers: 1.35 million Discouraged workers: 0.34 million (340K) Part-time for Economic Reasons: 4 million
January 2023 Unemployment rates
For Jan. 2023, the official unemployment rates: U-3: 3.4% (This is the lowest rate reported since 1969) The highest U-3 of the pandemic occurred in April 2020, when it reached 14.7%. U-4: 3.6% U-5: 4.2% U-6: 6.6%
Which type of unemployment never falls to 0?
Frictional
Frictional unemployment
Frictional unemployment is unemployment that occurs as a result of people moving between jobs. It takes time for skilled workers to find a job that uses their skills. For example, recent college graduates may need some time to find a suitable job or they may need to relocate to find a job in their field. Ex. When these graduates are actively seeking work but not working, they are considered frictionally unemployed. They have skills that employers are seeking, but it takes some time for them and a prospective employer to realize they are a match. During this time, their human resources (i.e., labor) go unused.
During the Covid-19 pandemic, a certain type of worker was able to collect unemployment insurance benefits for the first time ever. What type of worker?
Gig workers, contractors, and the self-employed became eligible for unemployment insurance benefits for the first time ever during the pandemic. The program was called Pandemic Unemployment Assistance (PUA), but this and other pandemic-related emergency unemployment insurance programs have ended
What has the JOLTS report recently implied?
In the last 2 years the yellow has been over the blue (Means more hires than people laid off) Implies there is a lot of churn aka turnover in the US job market
Incomplete specialization
Incomplete specialization is a concept in economics that refers to situations where countries or firms produce a variety of goods and services, but do not specialize completely in any one product. In other words, they produce some goods or services that they are relatively good at producing, but also produce other goods or services in which they are less efficient. Many countries engage in incomplete specialization due to a variety of factors, such as differences in resource endowments, technological capabilities, and market demand.
What is part-time employed due to economic reasons?
Individuals who are employed part-time for economic reasons are those who are working less than full-time hours because their employer cannot provide them with enough work, or because they are unable to find full-time work that meets their needs.
Why has the employment-population ratio (EPOP) decreased from 64% to 60%?
Is it harder to find a job now than before? Could be due to a changing age structure Could be due to the quality of the job market Demographic changes: If the population of people who are not in the workforce (such as retirees or students) grows faster than the population of people who are in the workforce, the E-POP can decline. Automation and technological advances: As technology advances, some jobs may become automated or outsourced, leading to fewer employment opportunities for certain groups of workers. Shifts in industry: If certain industries are growing faster than others, this can impact the E-POP as workers move from one industry to another.
The Employment-Population Ratio
Is the percent of the civilian noninstitutional population aged 16 years and over that is employed. In other words, it is the percent of POPr actually working. The equation is Employment-Population Ratio = E / POPr In Jan. 2023, the Employment-Population Ratio was 60.2%. The Employment-Population Ratio is useful because it provides additional information about the labor situation in the U.S. beyond what Ur provides. Increased optimism that jobs are available leads to an increase in the Labor Force Participation rate (LFP%). As the labor force grows with more people reentering the job market as conditions begin to improve, both the number of employed and unemployed rise. So the Employment-Population Ratio might rise at the same time that Ur increases, but it is the Employment-Population Ratio that gives a true signal of the improving job market.
Labor Participation Rate Formula
LFP% = LF / POPr
Who are the worlds largest SERVICE exporters? (as of 2022)
Leader: USA Others: UK, Ireland, Germany
What specific industry was hit the hardest due to Covid-19?
Leisure & Hospitality
Examples of Free Trade Areas
NAFTA (USA, Canada, and Mexico Agreement) and ASEAN
Are the number of people receiving unemployment insurance the same as the number of people counted as unemployed in the Employment Situation Report? Why or why not?
No, not the same. In pre-pandemic times, many out-of-work people were not eligible at all for unemployment insurance, such as gig workers, contractors, and the self-employed. New programs enacted in response to Covid helped to cover some of these out-of-work people, but those programs have now ceased. So once again, these types of workers are unable to file for, and receive, unemployment insurance, but they are counted as unemployed in the monthly Employment Situation Report, as long as they are actively looking for work. Both before and during the pandemic, some out-of-work people delay or even never apply for benefits, for a variety of reasons such as personal beliefs, embarrassment at being out of work, finding the process too burdensome or complex, or an inability to access the internet (no Wi-Fi at home, no public transportation to sites with free Wi-Fi) to submit claims. Also, some people are still jobless when their benefits run out. So, the number of unemployment insurance claims is never the same as the number of unemployed persons.
Labor Scarring
Occurs when the long-term unemployed see a decline in their skills; and then employers become reluctant to hire people who have been out of work a long time, further eroding their skills and ability to find work. It occurs to structurally unemployed persons, although initially, the unemployment may have been due to cyclic reasons. The point is that the passage of time causes the person to become less skilled and thus, move from cyclically unemployed to long-term structurally unemployed. The most recent period of massive and prolonged labor scarring occurred during the Great Recession and its aftermath.
What happened to the price of oil during the 2008 Recession?
Oil prices doubled from 2007-2008 and intensified the recession (but oil price increases are not always associated with economic downturns) If supply is stable and demand increases, the price will also increase ( aka what happened from 2002-2007)
What is included in "other separations" in the JOLTS report?
Other separations include retirements, transfers to other locations, separations due to employee disability; and deaths. Excluded from other separations are transfers within the same location; employees on strike; employees of temporary help agencies, employee leasing companies, outside contractors, or consultants."
Explain USA petroleum exports and imports over the last two decades.
Over the last two decades, the United States has experienced significant changes in its petroleum trade patterns, with a shift from being a net importer of petroleum products to becoming a net exporter. The following is a brief overview of the trends in US petroleum exports and imports over the last two decades: Import trends: In the early 2000s, the US was heavily dependent on imported petroleum products, with imports peaking in 2005 at around 13 million barrels per day (b/d). Between 2005 and 2008, the US began to reduce its dependence on imported oil, as domestic production of crude oil increased due to the development of shale oil and gas resources. Following the global financial crisis of 2008, US oil imports declined sharply as demand for oil products decreased and domestic oil production continued to grow. By 2019, US oil imports had fallen to around 6 million b/d. Export trends: US oil exports began to rise in the early 2010s, as the country's domestic oil production continued to grow and new export infrastructure was developed. In 2015, the US lifted its crude oil export ban, which had been in place since the 1970s, leading to a significant increase in crude oil exports. Since 2016, the US has become a net exporter of petroleum products, with exports surpassing imports. In 2019, the US exported an average of around 8 million b/d of petroleum products. Impact of COVID-19 pandemic: The COVID-19 pandemic had a significant impact on US petroleum trade in 2020, as demand for oil products declined sharply due to the lockdowns and travel restrictions imposed to control the spread of the virus. US oil imports fell to their lowest levels in decades, while exports also declined due to reduced demand in key export markets. Despite the pandemic-related disruptions, the US remained a net exporter of petroleum products in 2020, with exports exceeding imports by around 1 million b/d. Overall, the US has undergone a significant transformation in its petroleum trade over the last two decades, moving from a position of heavy dependence on imported oil to becoming a major player in the global oil market as a net exporter of petroleum products. The growth in domestic oil production, the development of new export infrastructure, and the lifting of the crude oil export ban have been key factors driving this shift in US petroleum trade patterns. THE USA IS INTER-DEPENDENT ON OIL
Are housing permits pro-cyclic or counter-cyclic?
Pro-cyclic
Are job openings pro-cyclic or counter-cyclic?
Pro-cyclic
Is GDP pro-cyclic or counter-cyclic?
Pro-cyclic
Is employment pro-cyclic or counter-cyclic?
Pro-cyclic
Is the labor participation rate pro-cyclic or counter-cyclic?
Pro-cyclic
Pro-cyclic
Pro-cyclic in economic terms refers to indicators that are positively correlated with the business cycle. In other words, when the economy is growing, these indicators will also be growing, moving up, or becoming more positive.
Pros of free trade aggreements
Pros: Increased economic growth: FTAs can lead to increased economic growth by promoting trade between countries and allowing businesses to expand into new markets. Lower prices: By removing trade barriers such as tariffs, FTAs can lower the cost of imported goods for consumers, which can lead to lower prices. Increased competition: FTAs can increase competition between firms, which can drive innovation, efficiency, and lower costs. Access to new markets: FTAs can provide businesses with access to new markets and customers, which can lead to increased sales and profits. Job creation: By promoting trade and economic growth, FTAs can lead to the creation of new jobs in industries that benefit from increased trade.
JOLTS Report Pros and Cons
Pros: Provides more detailed information than the monthly employment report: The JOLTS report provides more detailed information on labor market dynamics than the monthly employment report, as it includes data on job openings, hires, and separations across industries and regions. Helps to identify labor market trends: The JOLTS report can help to identify labor market trends, such as changes in the level of job openings or the rate of voluntary quits, which can provide insight into the health of the labor market. Can inform workforce development policies: The JOLTS report can provide valuable information for policymakers and workforce development professionals who are seeking to align training programs and other workforce development initiatives with the needs of employers. Cons: Limited sample size: The JOLTS survey has a smaller sample size than the monthly employment report, which can limit its accuracy and representativeness. Lag time: The JOLTS report is released with a lag of several weeks after the end of the reporting period, which can limit its usefulness for policymakers and other stakeholders who require more timely information. Lack of context: The JOLTS report provides data on labor market indicators without providing contextual information about the broader economic environment, such as GDP growth or inflation, which can limit its usefulness for understanding the overall state of the economy. Limited information on job quality: The JOLTS report provides information on job openings, hires, and separations, but it does not provide detailed information on the quality of the jobs being created or the wages being paid. This can limit its usefulness for understanding the quality of employment opportunities in the labor market.
Regional Free Trade Agreement
Regional free trade agreements (FTAs) are agreements between two or more countries in a specific geographic region that aim to reduce or eliminate tariffs, quotas, and other trade barriers between them. These agreements are designed to promote trade and economic integration between the participating countries and increase their competitiveness in the global market.
Does India have a comparative advantage in goods or services?
Services
Why has the world GDP grown at 15x, while the US GDP has grown by 8x?
Shows foreign nations have grown at a much faster rate
Which type of unemployment can be concerning?
Structural --> leads to labor scarring
Structural unemployment
Structural unemployment is unemployment that occurs due to a mismatch between the skills and experience required for the jobs available and that held by the people looking for jobs. The longer a person is unemployed, the more difficult it is for that person to find work.
How does the E-POP Ratio vary?
The Employment-Population Ratio varies greatly by educational attainment, gender, and race
What is the International Trade in Goods and Services Report?
The International Trade in Goods and Services Report is a statistical report that provides information on the value of goods and services traded between different countries around the world. This report is typically compiled and released by national statistical agencies or international organizations such as the World Trade Organization (WTO) and the International Monetary Fund (IMF).
The JOLTS Report
The Job Openings and Labor Turnover Survey (JOLTS) is a monthly report released by the U.S. Bureau of Labor Statistics. According to BLS, JOLTS covers "all private nonfarm establishments, as well as federal, state, and local government entities in the 50 states and the District of Columbia." BLS collects data on "total employment, job openings, hires, quits, layoffs and discharges, other separations, and total separations." So, JOLTS goes beyond the monthly Employment Situation report and the weekly Initial Claims report in that it does not just report the level (absolute number) of jobs and the net change in employment or the number of filers. Only JOLTS can provide information for on how many people quit their jobs each month or how many jobs openings firms have. It also provides figures for all job separations and hires.
Which is always higher: the Employment Population ratio or the Labor Force Participation Rate?
The Labor Force Participation Rate (LFP%) will always be higher. Both LFP% and the Employment Population Ratio use the same denominator: the relevant population (POPr). LFP% will always be higher because it includes in its numerator both employed and unemployed persons.
when was the last time oil prices were at all-time highs?
The all-time high for crude oil prices was reached in July 2008, when the price of Brent crude oil, the international benchmark, hit a peak of $147.50 per barrel. At the time, concerns over geopolitical tensions, supply disruptions, and strong global demand contributed to the price surge.
Differences between the household survey and the establishment survey
The establishment survey and the household survey are two different methods used by the Bureau of Labor Statistics (BLS) to collect employment and unemployment data. Here are some differences between these two surveys: Target population: The establishment survey focuses on businesses and other types of organizations, while the household survey targets individuals aged 16 and over who are not institutionalized. Sample size: The establishment survey covers about 145,000 businesses and government agencies, which employ around 790,000 individual worksites. The household survey, on the other hand, covers around 60,000 households, representing around 110,000 individuals. Survey method: The establishment survey is conducted by phone or in person and asks detailed questions about employment, hours worked, and wages for all employees of the surveyed businesses. The household survey is conducted through personal interviews and asks questions about each household member's labor force status, including employment, unemployment, and demographic characteristics. Frequency: The establishment survey is conducted monthly, while the household survey is conducted monthly as well, but with a larger sample, and four times a year with a smaller sample. Data collected: The establishment survey provides data on non-farm payroll employment, average workweek hours, and average hourly earnings. The household survey provides data on the labor force participation rate, unemployment rate, and other demographic characteristics of the labor force.
Household Survey
The household survey (CPS) is designed to measure the labor force status of the civilian noninstitutional population with demographic detail. The national unemployment rate is the best-known statistic produced from the household survey. The survey also provides a measure of employed people, one that includes agricultural workers and the self-employed. A representative sample of U.S. households provides the information for the household survey. 60k households Includes farms & self employed workers Not effected by strikes Everyone counts once 16 years or older
How are customs unions different than free trade areas?
The main difference between FTAs and customs unions is that customs unions involve a higher degree of integration and coordination of trade policies among member countries. In a customs union, member countries have a common external trade policy, which means they must negotiate and adopt a common stance on trade issues with non-member countries. This can provide greater bargaining power and efficiency in negotiations with non-member countries, but can also limit member countries' ability to pursue their own trade policies. In summary, FTAs focus on reducing or eliminating internal trade barriers, while customs unions go further by adopting a common external tariff on goods imported from non-member countries.
Advantage of the claims report?
The major advantage of the Claims report is timeliness. Of all the major reports of economic data, this is the only weekly one. Most economic reports provide monthly data, and a handful provide quarterly data (such as GDP). As such, the initial claims figure provides information on what is happening right now in the economy and the labor market, as well as what may happen in the future (Baumohl calls it a "coincident" indicator on page 55 of his Secrets of Economic Indicators book, but most analysts classify it as a leading indicator and in fact, he also does so on page 14). In particular, the trend in weekly initial claims is likely to indicate if the monthly unemployment rate will go up or down.
What kinds of unemployment capture the natural rate of unemployment?
The natural rate of unemployment is captured by the first two types: frictional and structural. These two types of unemployment will always exist, even at the peak of the business cycle, and thus unemployment will never drop to 0%.
Establishment survey (Payroll survey)
The payroll survey (CES) is designed to measure employment, hours, and earnings in the nonfarm sector, with industry and geographic detail. The survey is best known for providing a highly reliable gauge of monthly change in nonfarm payroll employment. A representative sample of businesses in the U.S. provides the data for the payroll survey. 1/3rd of US firms, or 144k firms and/or worksites No farms or self employed workers Effected by strikes Does double count NOT limited by age
Explain how a nation's exports and/or imports as a percent of GDP may exceed 100%.
The reason exports or imports or both may exceed 100% as a percent of the nation's GDP is that GDP is a measure of domestic production only, as in, the added-value. Imports and exports are counted at the full value of each. To give a hypothetical example, say that Hong Kong imports intermediate inputs or components worth $150 and then combines the components into a finished product which is then exported for $500. Hong Kong will have exports worth $500 and imports (a GDP subtraction) of $150, for an overall GDP of $350. Here, the value of the exports of Hong Kong are higher than the Hong Kong GDP. Exports of $500 divided by GDP of $350 means exports are worth 143% of GDP.
US comparative advantage in services explained
These trends indicate the U.S. has developed a comparative advantage in services. Specifically, the U.S. is known globally for excellence in higher education, medical, consulting, and financial services. Also, the global spread of U.S. pop culture via the entertainment industry has boosted U.S. service exports and spurred international travelers to visit the U.S., boosting tourism and/or travel service exports. Additionally, the vast scale of the U.S. in geographical size and cultural variety further attracts tourists from across the globe.
Why does Mexico and Canada have more employment growth than the US?
They have much higher labor forces than before (could imply increased immigration [more accepting], natural population growth, etc.)
JOLTS Report Separations classifications
Total Separations comprises of: 1) Quits, 2) Layoffs and Discharges, and 3) Other Separations.
Trade Diversion
Trade diverted due to regional economic integration; occurs when low-cost foreign suppliers outside a free trade area are replaced by higher-cost suppliers within a free trade area. Imports are shifted from the world's comparatively most efficient producer Trade diversions can show the economic inefficiency that free trade areas can create since FTAs are not always a certain improvement of global free trade.
Unemployment Formula
U = LF - E
Labor Force Formula
U = LF - E and therefore E + U = LF
U4 unemployment
U3 + discouraged workers U4 unemployment is one of the broader measures of unemployment that takes into account not only those who are unemployed and actively seeking work (as in U3 unemployment), but also includes those who have given up on looking for work due to a lack of opportunities, and are therefore known as "discouraged workers." More specifically, U4 unemployment is calculated by adding the number of discouraged workers to the U3 unemployment rate and dividing the sum by the total labor force, and then multiplying the result by 100. In other words, U4 unemployment includes all of the individuals counted in the U3 measure, as well as those who have stopped looking for work because they believe there are no suitable job openings available for them.
U3 Unemployment
U3 unemployment is the most commonly used measure of unemployment in the United States. It is defined as the total number of unemployed people who are actively seeking employment as a percentage of the labor force (which includes both employed and unemployed individuals). The U3 unemployment rate is calculated by dividing the number of unemployed individuals by the total labor force and multiplying the result by 100. The U3 unemployment rate is widely used by economists, policymakers, and journalists as a key indicator of the health of the labor market. It provides a snapshot of the number of people who are out of work and actively looking for a job, and is often used to compare labor market conditions over time or across different regions or demographic groups. However, it is important to note that the U3 unemployment rate does not capture everyone who may be experiencing labor market challenges, such as individuals who have stopped actively seeking work or who are underemployed. Other measures of unemployment, such as the U4, U5, and U6 rates, take these factors into account and provide a broader picture of labor market conditions.
U5 unemployment
U4 + marginally attached workers U5 unemployment provides a broader measure of labor market conditions than U3 and U4 unemployment, as it takes into account individuals who are discouraged and have stopped looking for work as well as those who are marginally attached to the labor force. However, U5 unemployment still does not capture individuals who are working part-time but would like to work full-time (who are included in U6 unemployment), or those who are available for work but have not actively looked for employment recently.
How large is the USA's GOODs exports worth? How much are the other leaders? (as of 2022)
USA = ~$2 trillion China = ~$3.5 trillion
Unemployment Rate Formula
Ur = the Unemployment Rate. Ur = U/LF
In what countries is the female employment to population ratio the highest for?
Vietnam (68%), Kenya (66%), China (59%), and Thailand (58%)
What foreign countries have grown at fast rates?
Vietnam (electronics and textiles), Indonesia (coal/oil/gas, agriculture [palm oil, rubber], Bangladesh (strong ready-made garment)
Who has comparative advantage? In South Korea, a worker can produce 12 iPads or 36 cameras in one day. In Vietnam, a worker can produce 4 iPads or 28 cameras in one day.
Vietnam has a comparative advantage in cameras. This is because a Viet worker is 77.8% as productive as a Korean worker in cameras (28/36) whereas a Viet worker is only 33.3% as productive in iPads (4/12). Conversely, South Korea has a comparative advantage in iPads. A Korean worker is only 1.3 times (36/28) as productive as a Viet worker in cameras but is 3 times (12/4) as productive as a Viet worker in iPads. The opportunity cost of one iPad in Vietnam is 7 cameras (28/4), whereas it is only 3 cameras in Korea (36/12). South Korea has a comparative advantage in iPads because it has a lower opportunity cost to produce iPads (in terms of cameras) than Vietnam does. Reciprocally, Vietnam has the comparative advantage in cameras because it has more of an opportunity cost to produce iPads (in terms of cameras) than South Korea does.
At what terms of trade (give a range) would both nations be willing to trade with each other?
Vietnam is pleased to 100% specialize in cameras and import iPads, as long as they can export LESS THAN 7 cameras per imported iPad. South Korea is pleased to mostly produce (that is, partially specialize in) iPads, as long as they can import MORE THAN 3 cameras per exported iPad. Thus, there is a whole range available for mutually advantageous, voluntary trade: 3 < TOT < 7 (TOT = possible relative prices of cameras per iPad).
How often does the jobs claim report come out?
Weekly
Disinflation
When inflation is still present, but it is increasing at a smaller and smaller rate (rate is positive but decreasing, aka smaller inflation)
Direction of trade
Where our exports are going and where our imports are coming from
Trade Creation
increase in the level of trade between nations that results from regional economic integration (aka removal of tariff leads to more trade since it allows countries to focus on products that have a comparative advantage)
Productivity
output per unit of input aka output per worker
comparative advantage
the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors
absolute advantage
the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources
gains of trade
the extra output that trading partners obtain through specialization of production and exchange of goods and services
Terms of Trade (TOT)
the prices a country receives for its exports to the prices paid for its imports (given as a ratio of index) increase in the ratio -> terms of trade improvement decrease in the ratio -> terms of trade deterioration
U6 unemployment
u5 + underemployed workers U6 unemployment is the broadest measure of unemployment that the U.S. Bureau of Labor Statistics (BLS) reports. It includes all individuals who are counted in U5 unemployment (i.e., those who are unemployed and have given up looking for work due to a lack of opportunities, as well as those who are marginally attached to the labor force) as well as those who are employed part-time but would prefer to work full-time. More specifically, U6 unemployment is calculated by adding to the U5 rate the number of individuals who are employed part-time for economic reasons, and then dividing the sum by the total labor force, and multiplying the result by 100. U6 unemployment provides the broadest measure of labor market conditions among the different unemployment measures, as it includes individuals who are discouraged, marginally attached to the labor force, and underemployed. It is often used by economists, policymakers, and journalists as a more comprehensive measure of labor market slack, or the gap between the labor supply and demand. However, it is important to note that U6 unemployment does not capture individuals who are available for work but have not actively looked for employment recently.
How much money is added to the US trade deficit every month?
~$100 Billion (aka $1.2 trillion each year)
How large is the USA's SERVICE exports worth? How much are the other leaders? (as of 2022)
~$923 billion, which is double of the UK's ~$450 billion. Ireland and Germany = ~395 billion
