UNEMPLOYMENT

Frictional-unemployment that occurs when people take time to find a job Seasonal- unemployment occurring as a result of harvest schedules or when industries shut down for the season

Structural- unemployment that occurs when workers’ skills don’t match the jobs that are available Changes in consumer demand Discovery of new resources Lack of education Development of new technology Globalization Cyclical- rises during economic downturns and falls when economy improves

3 Types of Unemployment

“No Job” Frictional – “temporary”, “transitional”, “short-term.” (“between jobs” or “search” unemployment) Examples: People who get “fired” or “quit” to look for a better one. 2. “Graduates” from high school or college who are looking for a job. 3. “Seasonal” or weather-dependent jobs such as “agricultural”, “construction”, “retail”, or “tourism”. [lifeguards, resort workers, Santa’s, & migrant workers.] Frictional unemployment signals that “new jobs” are available and reflects “freedom of choice”. These are qualified workers with “transferable” skills. “No Job”

2. Structural Unemployment Structural – “technological” or “long term”. Your skills don’t match up with what is needed, You are replaced by a computer. Automation may result in job losses. Consumer taste may make a good “obsolete”. The auto reduced the need for carriage makers. Farm machinery reduced the need for farm laborers. “These jobs do not come back.” “Non-transferable skills” – choice is prolonged unemployment or retraining.

3. Cyclical Unemployment Unemployment caused by economic downturns Economy….we are in recession, people get laid off” “Durable goods jobs” are impacted the most. These can be postponed because they can be repaired. “Cyclical unemployment” is “real unemployment.” “These jobs do come back.”

Unemployment 1900-1990 1950-59 average = 4.39% 1960-69 average = 4.65%

Natural Rate of Unemployment 4-6% http://latoyaegwuekwe.com/geographyofarecession.html

Measuring Unemployment Labor force- civilians over 16 who have a job or actively looking for employment Unemployment rate - % of nation’s labor force that’s unemployed (# of people unemployed / # of people in the labor force) *100

7.6/149.3 x 100 = Unemployment Rate of 5.1% Under 16 and/or Institutionalized (70.5 Million) Not in Labor Force (76.8 Million) Total Population (297 Million) Employed (141.7 Million) Labor Force (149.3 Million) Unemployed 7.6 mil.

Effects of terrorism- slows down the economy Full employment- level of employment reached when no cyclical unemployment exists Underemployment- working at a job for which one is over-qualified or working part-time when full time is desired PhD working at McD’s Discouraged workers- a person who wants a job but has given up the search Not factored into the unemployment rate Effects of terrorism- slows down the economy After 9/11/01, many jobs were lost in the air transportation industry

Unemployment and social problems Each one-point increase in the unemployment rate for an extended period is associated with: 920 more suicides 650 more homicides 4000 more people admitted to state mental institutions 3300 more people sent to state prisons 37,000 more deaths increases in domestic violence and homelessness

Survey on Unemployment BLS (Bureau of Labor statistics) calls 60,000 households every month. [Current Population Survey] They ask three questions: Are you working? If the answer is “yes”, you are member of the labor force. But, if the answer is no, you get a 2nd question. 2. Did you work at all this month-even 1 day? If “yes”, you are a member of the LF. But, if the answer is no, you get a 3rd question. 3. Did you look for work during the last month? [agency, resume, interview] A “yes” counts you as part of the LF. A “no” means you are not counted. You are a “discouraged worker.” The labor force consists of the employed and unemployed.

Unemployment When It Was 4.5% Demographics of Unemployment 27.6% 12.5% 8.9% 8.9% 7.2% 7.1% 3.2% 3.4%

1982 9.7% Unemployment Unemployment At 9.7% 48.0% 20.4% 18.9% 18.4% 27.6% 20.4% 18.9% 18.4% 15.2% 15.0% 12.5% 8.8% 8.9% 8.9% 8.3% 7.2% 7.1% 3.2% 3.4%

The More You Learn, The More You Earn 1998 Overall Unemployment Rate = 4.4% [Unemployment Rate & Median Earnings by Education] $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 8% 7% 6% 5% 4% 3% 2% 1% 7.1% $19K Less Than High School Diploma Median Earnings Unemployment Rate - 1998 4.1% $28K High School Grad 3.2% $31K Some College Grad 2.5% $33K Associates Degree Advanced Degree 1.9% $51K College 1.6% $60K Master’s 1.3% $75K

An "acceptable" level of unemployment means that the government economist to whom it is acceptable still has a job.

INFLATION Definition- general increase in prices Purchasing power- ability to purchase goods and services 1908 1955 2001 Cost $850 $3,030 $19,075 Hours Worked 4,696 1,638 1,346

Price index- measurement that shows how the average price of a standard group of goods changes over time Compare earlier prices of the same goods to see how much prices have changed over time Consumer Price Index- determined by measuring the price of a standard group of goods meant to represent the market basket of a typical urban consumer Market basket- representative collection of goods and services (updated every 10 years) Ex. food and drinks, housing, transportation, entertainment

Hyperinflation- inflation that’s out of control Inflation rate- the percentage rate of the changes in the price level over time (CPI Year 2 – CPI Year 1) / CPI Year 1 = ? x 100= inflation rate for Year 1 Hyperinflation- inflation that’s out of control

Causes Demand-pull theory- inflation occurs when demand for goods and services exceeds existing supplies Too many dollars chasing too few goods Cost-push theory- inflation occurs when producers raise prices in order to meet increased costs Increase in production costs increase in sale price for final product