What does this cartoon mean? Warm Up What does this cartoon mean?

Announcements We will work on Module 12 and 13 today. We will finish 13 on Monday (or Tuesday). This means, Module 14 is ON YOUR OWN over thanksgiving break. You will have a quiz when you return and then we will finish with Module 15 and have a TEST the first week in December. REVIEW OVER THANKSGIVING AS WELL Homework tonight: Module 11 and 12.

Current Events http://www.bls.gov/bls/unemployment.htm

Current Events http://www.ted.com/talks/mohamed_ali_the_link_between_unempl oyment_and_terrorism.html The dangers of this lesson…

Surprise

Three Types of Unemployment (Module 12 and 13) 1. Frictional 2. Structural 3. Cyclical How do we calculated unemployment? Labor force=unemployed + employed 100x (unemployed)/(Labor force)

Business Cycles flows

#1. Frictional Unemployment Temporarily unemployed or between jobs. Qualified workers with transferable skills but they aren’t working. Examples: High school or college graduates looking for jobs. Individuals that were fired and are looking for a better job. You’re Fired!

Seasonal Unemployment A specific type of frictional unemployment which is due to time of year and the nature of the job. These jobs will come back Examples: Professional Santa Clause Impersonators Construction workers in Michigan 10

#2. Structural Unemployment Changes in the structure of the labor force makes the worker’s skills obsolete and the jobs will not be coming back. Workers must learn new skills to get a job. The permanent loss of these jobs is called “creative destruction.” Examples: VCR repairmen Carriage makers

Technological Unemployment Type of structural unemployment where automation and machinery replace workers causing unemployment Examples: Auto assemblers fired as robots take over production Producers of Capital Goods (tractors) fire assembly workers 13

The top 20 jobs that are in danger of computerisation, according to the Oxford report, are: 1.Telemarketers 2.Title examiners, abstractors and searchers 3.Hand sewers 4.Mathematical technicians 5.Insurance underwriters 6.Watch repairers 7.Cargo and freight agents 8.Tax preparers 9.Photographic process workers and processing machine operators 10.New Accounts clerks 11.Library technicians 12.Data entry keyers 13.Timing device assemblers and adjusters 14.Insurance claims and policy processing clerks 15.Brokerage clerks 16.Order clerks 17.Loan officers 18.Insurance appraisers (auto damage) 19.Umpires, referees and other sports officials

#3 Cyclical Unemployment Unemployment that results from economic downturns (recessions). As demand for goods and services falls, demand for labor falls and workers are fired. Examples: Steel workers laid off during recessions. Restaurant owners fire waiters after months of poor sales due to recession. This sucks! 15

Review: HOW TO CALCULATE UNEMPLOYMENT Rule: Unemployed are those who are jobless, looking for work and available to work. IF NOT SEEKING WORK THEN NOT COUNTED AS UNEMPLOYED Survey of 60K people done once a month LABOR FORCE = total of those actually employed and those who are unemployed Unemployment Rate = # of unemployed x 100 Labor Force

The Natural Rate of Unemployment (NRU) Two of the three types of unemployment are unavoidable: Frictional unemployment (TEMPORARY) Structural unemployment (OBSOLETE) Together they make up the natural rate unemployment (NRU). America is at full employment if we have NRU. This is the normal amount of unemployment that we SHOULD have.

Full employment means NO Cyclical unemployment! Economists generally agree that unemployment rate of around 4 to 6 % is full employment. 4-6% Unemployment = NRU Okun’s Law: When unemployment rises 1 percent above the natural rate, GDP falls by about 2 percent

19

Rule: There is a negative relationship between unemployment and growth Rule: There is a negative relationship between unemployment and growth. Unemployment rises in a recession and usually falls during a period of economic expansion.

Unemployment Rates of Different Groups, 2007 Unemployment Rates of Different Groups, 2007. It is much higher now for all groups but especially for non-college graduates.

The Effect of a Minimum Wage on the Labor Market

Unemployment Comparison for the last decade

Differences in state unemployment rate usually don’t last too long because people will move from a state with a high unemployment rate to one with a low unemployment rate

The natural rate in France and Germany is around 8–10% The natural rate in France and Germany is around 8–10%. Higher than America. Why? Some economists attribute difference to more generous unemployment benefits in European countries U.S. unemployment benefits usually last for 6 months Unemployment benefits in some European countries are indefinite Generous benefits reduce incentives to search for a job 25

Firing workers can be costly but in America the amount received for unemployment is always less than the actual wages that would have been received

What’s wrong with the unemployment rate? Can hide actual unemployment rate: (Sept.2011 is 9.2%) Discouraged job seekers- Some people are no longer looking for a job because they have given up. Part-Time Workers- Someone who wants more shifts but can’t get them is still considered employed. Race/Age Inequalities- Hispanics – 11% for Sept. 2011 But teenage rate is 27% African American- 16% for Sept. 2011 But teenage rate is 45% Illegal Labor- Many people work under the table. 27

Alternative Measures of Unemployment, 1994–2010 reveals that actual jobless number is much higher.

The Changing Makeup of the U.S. Labor Force 1948–2009