Read the Wall Street Journal: Write down your answers. 1. Why is the unemployment rate misleading? 2. Is there a problem with so many men dropping out of the labor force? 3. Who are the underemployed? 4. Do you think the government should report more data from the BLS? If so, what data would you like to see reported.

Key Economic Concepts To be counted as employed, you must be working at least one hour a week To be considered unemployed-You must be without work and seeking work The labor force (LF) is the number of employed (E) plus the number of unemployed(U). The unemployment rate (UR) is the percentage of the labor force classified as unemployed. UR=100*(U/LF) People unemployed who have stopped looking are “out of the labor force) and are not counted. The civilian labor force is all people over 16- not incarcerated or in the military and able to work.

Current Events http://www.bls.gov/lau/stalt.htm Once on the site: read through the page and what do you notice? What do the U4, U5, and U6 measure? Compare North Carolina with another state ( you decide) in those categories and how are they different? Scroll to the bottom and which states have the lowest underutilization and which states have higher rates? Why might that be? Why would the government only report U3 as opposed to reporting the actual U6 unemployment rate?

Once on the site: Click on National Unemployment Rate Scroll down and go to Frequently asked questions and click on What are the Basic Concepts. : Read the whole page and take note of facts you did not know or find interesting. Go back to Home Page and click on CPI. Complete questions on the board.

Current Events http://www.ted.com/talks/mohamed_ali_the_link_between_unempl oyment_and_terrorism.html Take a look at this TED talk from a Human Rights activist. Jobs create opportunity and opportunity creates hope for a future.

WHAT ABOUT THE UNDEREMPLOYED WHAT ABOUT THE UNDEREMPLOYED? What about people completely dropping out of the labor force. The labor force participation rate is the lowest in 15 years. Why is that a problem?

Three Types of Unemployment (Module 12 and 13) 1. Frictional 2. Structural 3. Cyclical How do we calculate 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 12

#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 15

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! 17

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 Labor Force Participation Rate Labor Force Participation Rate = Labor Force___________ X 100 Population age 16 and older

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

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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 28

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. Marginally attached worker: Would like work and have looked but are not currently looking. 29

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

Structural Unemployment Minimum wages - a government-mandated floor on the price of labor. In the U.S., the national minimum wage in 2009 was $7.25 an hour. Unions - by bargaining for all a firm’s workers collectively (collective bargaining), unions can often win higher wages from employers than the market would have otherwise provided when workers bargained individually.

Structural Unemployment Efficiency wages - wages that employers set above the equilibrium wage rate as an incentive for better performance. Side effects of government policies - public policies designed to help workers who lose their jobs; these policies can lead to structural unemployment as an unintended side effect.

Here’s where we were and now… http://www.nytimes.com/interactive/2011/09/25/us/unemployment -landscape-of-the-nation.html?_r=0 This is from 2011 http://www.nytimes.com/2015/01/10/business/economy/jobs- unemployment-figures-december.html Take a moment between now and the weekend and read this article. What can you summarize and deduce from what you have already learned in AP and what does the unemployment rate have to do with the Federal Reserve?

MIT Economics Professor calls Americans stupid? Are you? http://www.cnn.com/2014/11/14/politics/obamacare-voters-stupid- explainer/ https://www.youtube.com/watch?v=Adrdmmh7bMo https://www.youtube.com/watch?v=1tI9hr3pgWI Rand Paul is a doctor and advocates free market fix. https://www.youtube.com/watch?v=pfymt2FntSM https://www.youtube.com/watch?v=Rf9MZ7wf6Mk The ACA --- will it help economic growth or hinder it in the long term? Why do you think politicians never tried Free Market ideas to fix it? Why is it important to understand finances and economics as a voter?

In class exercise

https://www.youtube.com/watch?v=lgn4auz1wPE Let’s recap with Mr. Clifford