MIDTERM ECON400

According to the text, why is the unemployment rate in many foreign countries understated relative to the U. S. rate? Does the reasoning in the text necessarily make sense?

First, to your instructor the reasoning does not make sense, but it is okay with me if you think it does. The text argues that the United States via the CPS tries to find the number of unemployed. In other countries the number of unemployed is counting by counting those who show up to collect an unemployment check. (I think that this does not cause the US data to overstated unemployment relative to other countries because in other countries people who do not wish to work for pay might be interested in getting an unemployment check.)

How many households are surveyed?

60,000.00

Why are unemployment rate numbers issued since January 1994 not directly comparable with these issued before 1994.

A revised CPS questionnaire was introduced in 1994. According to the footnote the change in the way the questions are asked caused the new unemployment numbers to be about ½% higher than under the old questionnaire. (However, I have a different source that states it is .1% to .3% lower under the new questionnaire.)

How long is each household in the survey?

After a household is interviewed for 4 consecutive months, it leaves the sample for 8 months, and then is again interviewed for the same 4 calendar months a year later, before leaving the sample for good.

What is the name of the survey that gathers the data used to estimate the unemployment rate?

Current Population Survey

If a person is classified as being employed, what criteria has he met?

He must have worked at least one hour for pay at the establishment or worked in his own business, or worked without pay in a family owned business

What does it mean to say a person is marginally attached to the labor force? What is a discouraged worker? Although counting these two groups as unemployed would increase the unemployment rate, would including them change the way one would interpret unemployment figures?

If someone has not looked for a job within the past 12 months but states that they want to work are said to be marginally attached to the labor force. A discouraged worker is someone marginally attached to the labor force who states that they have not looked for work during the past 12 months because of job market conditions. Your instructor does not think that including them among the unemployed would change the way that we interpret the numbers. Both the number of unemployed and the number of workers marginally attached to the labor force increase during recession and fall during recoveries

What is a discouraged worker?

In economics, a discouraged worker is a person of legal employment age who is not actively seeking employment or who does not find employment after long-term unemployment. This is usually because an individual has given up looking or has had no success in finding a job, hence the term "discouraged".

What is the non-institutional population?

In the United States, the civilian noninstitutional population refers to people 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (penal, mental facilities, homes for the aged), and who are not on active duty in the Armed Forces

How many households does BLS survey each month? During which week of the month is the survey taken? To which week do the questions refer?

It surveys approximately 60,000 households in 2,000 counties and independent cities. It is taken during the week that includes the 19th day of the month and the questions refer to the week that includes the 12th day of the month

Define the mean and median durations of unemployment

Mean duration is the arithmetic average computed from single weeks of unemployment. Median duration is the midpoint of a distribution of weeks of unemployment.

What is a worker who is working part-time for economic reasons?

Part time workers for economic reasons People who work 1-34 hours per week but are looking for full-time work They are unable to find full time work so forced to take part time

A person can be considered employed if he (or she) meets one of three criteria. What are they?

People are considered employed if they did any work at all for pay or profit during the survey reference week. This includes all part-time and temporary work, as well as regular full-time, year-round employment. Individuals also are counted as employed if they have a job at which they did not work during the survey week, whether they were paid or not, because they were: On vacation Ill Experiencing child care problems On maternity or paternity leave Taking care of some other family or personal obligation Involved in a labor dispute Prevented from working by bad weather (i) Anyone who did any work at all for pay or profit. • (ii) Anyone who worked 15 hours or more in a family business (whether or not they were paid). • (iii) Anyone who was temporarily absent from work because of vacation, illness, bad weather, a labor management dispute, or for personal reasons. - A person has to satisfy only one of the above three conditions to be considered employed. (They just have to work for pay or profit 1 hour.)

Define the civilian non-institutional population. The civilian labor force. The number of people employed. The number unemployed

The civilian non-institutional population is the population that is physically and legally able to work. It consists of all people aged 16 and over who are not confined to an institution of some sort (hospital, home of the elderly, prison) and who are not in the armed forces. The civilian labor force consists of members of the civilian non-institutional population who either want to be or are working for pay. The number or employed are members of the civilian labor force who are working for pay or profit, while the unemployed are those who currently are not working for pay or profit (but who desire to do so).

How is the term "employed" defined in calculating the Unemployment rate? The term unemployed? The labor force?

The number of people in the labor force. This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work. ... In other words, it is the percentage of the population that is either working or actively seeking work.

What is the labor-force participation rate?

The participation rate is a measure of the active portion of an economy's labor force. It refers to the number of people who are either employed or are actively looking for work.

. What is the reference week?

The week (Sunday through Saturday) that includes the 12th day of the month. The reference week is the week used by the Bureau of Labor Statistics as the basis of data collection for Current Population Statistics, Current Employment Statistics and other survey programs.

. Suppose there are two economists who make their livings tracking economic conditions. One uses the official unemployment rate and the other uses U6 as his measure of the unemployment rate. Will this difference in unemployment rates used affect whether or not they think the economy is getting stronger or weaker? Why or why not?

These alternate measures of unemployment change in the same direction as the official unemployment rate. Hence using them would not change how we evaluate the direction in which the economy is moving, but they might affect the behavior of policy makers

To what questions does a surveyed person have to answer "yes" to be considered employed? What criteria does a person have to meet to be considered unemployed? (p.85)

To be considered employed the person has to answer yes to "did you do any work for pay", or yes to "did you do unpaid work in the family business or farm (at least 15 hours if unpaid)", or yes to "Did you have a job last week (including one from which you were temporarily absent)." To be considered unemployed they must have been available for work, have done no work for pay or profit, and have taken specific actions during the past 4 weeks to find a job.

. Define U4

Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers

Define U6

Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force

Define U5

Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force

In late 2009 and late 2011 what was the difference between U6 and the official unemployment rate? What about for late 2007?

U 6 and the official unemployment rate move together, though the distance between them increased from a low of 3.7% in late 2007 to 7.4% inlate 2008 and late 2011

Given your answers to question 5, what is the definition of the unemployment rate?

the unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. During periods of recession, an economy usually experiences a relatively high unemployment rate.

Define each of the four types of unemployment

• Frictional - do not have to retrain, move or accept a pay cut to find a new job and usually can find a new job quickly • Structural—due to a mismatch between worker skills and skills required for available jobs, or mismatch between location of workers and location of jobs. An explanation of long-term unemployment Although structural unemployment might increase as a result of a recession it can persist during an expansion and anti-recession policies usually cannot reduce it. • Seasonal Result of people working jobs only available during certain times of the year • Cyclical —unemployment associated with the business cycle. Will not be able to find a job until the recession ends.