Economic Challenges: SSEMA1c. Unemployment

MACROECONOMICS SSEMA1 SSEMA1 Illustrate the means by which economic activity is measured. Identify and describe the macroeconomic goals of steady economic growth, stable prices, and full employment. Define Gross Domestic Product (GDP) as the sum of Consumer Spending, Investment, Government Spending, and Net Exports (output expenditure model). Define unemployment rate, Consumer Price Index (CPI), inflation, real GDP, aggregate supply and aggregate demand and explain how each is used to evaluate the macroeconomic goals from SSEMA1a. Give examples of who benefits and who loses from unanticipated inflation. Identify seasonal, structural, cyclical, and frictional unemployment. f. Define the stages of the business cycle, including: peak, contraction, trough, recovery/expansion as well as recession and depression.

Macroeconomic Measures GDP Consumer spending (C) Investment (I) Fixed Capital Real Estate Excess Inventories Government Spending (G) Net Exports (X-M) Exports (X) Imports (M) Unemployment Cyclical Frictional Structural Seasonal Inflation Consumer Price Index (CPI) Producer Price Index (PPI) GDP Deflator

The Macro Economy

Foreign Sector Savings Government

The Unemployment Rate The unemployment rate is measured each month. The US unemployment rate as of May, 2008 was 5.5%... December, 2008--7.2%... March, 2009--8.5%... Nov, 2009--10.2%... March 2010--9.7%... October 2011--9.1%... March 2012--8.3%... October 2012--7.8… March 2012--7.7%... October, 2013--7.3% October, 2014—5.9% March, 2015—5.5% March, 2016—4.9% March, 2017—4.2% March, 2018—4.1% This measurement is a key measure of economic health. The Unemployment Rate

Some Sub-Categories High School Dropouts: 7.4% High School Graduates: 5.2% College Graduates: 2.4% White Males: 3.5% White Females: 3.3% Black Males: 7.8% Black Females: 6.3% Hispanic/Latino: 4.7% Asian: 2.8%

Average Income by Ethnicity Across-the board average: $51,700 White: $57,009 Hispanic: $39,005 Black: $33,321 Nigerian-American: $61,289 Indian-American: $100,547 http://www.businessinsider.com/heres-median-income-in-the-us-by-race-2013-9

Measuring Employment Bureau of Labor Statistics— conducts a survey of 50,000 households each month… This represents the US population… Based on these interviews, the BLS computes the… Unemployment rate—the percentage of the work force that is unemployed.

Which of the following individuals would be considered a part of the American work force? iRespond Question Multiple Choice F 460740CA-BBB6-D94C-8D88-707C6B1EFB83 A.) a retired Army sergeant who draws a large pension from the government. B.) a 17 year-old student who is trying to find a part-time job. C.) a 15 year-old student who waits tables for 25 hours/week. D.) a laid-off accountant who is living off his savings and traveling the world. E.)

You Are Employed… If you meet ANY of these criteria: You have worked for pay for one or more hours this week… You have worked at a family business without pay for 15 or more hours. You have job, but have been absent for vacation, illness, etc.

You Are Unemployed… 1. If you don’t meet any of the preceding criteria… 2. And if you’ve been actively looking for work during the past 4 weeks.

Types of Unemployment: Frictional Includes three types of workers: People who have decided to leave one job to look for another… New entrants to the labor force… Re-entrants to the labor force. Economists consider this type of unemployment to be HARMLESS.

Structural Unemployment Structural unemployment occurs as a result of two situations: Workers who lose their job as a result of NEW TECHNOLOGY… And workers who lose their job as a result of changes in CONSUMER PREFERENCES. Although there are always WINNERS and LOSERS… Economists also consider this type of unemployment to be HARMLESS.

A Peek at the Future There is currently a job in the transportation field that employs 3.5 million people. It is expected to disappear within the next ten years. Will that be a TERRIBLE THING for those workers?—YES. But millions of new, higher-paying jobs will be created for computer technicians and highly- skilled mechanics to keep these trucks on the road. Once again, the future of this country is going to be VERY PAINFUL for people who do not take care of their education.

Cyclical Unemployment Cyclical unemployment occurs when the economy COLLAPSES— During WHICH phase of the business CYCLE? The CONTRACTIONARY phase. This situation arises when people can’t find jobs… BECAUSE THERE ARE NO JOBS.

Which of the following individuals would be considered frictionally unemployed? iRespond Question Multiple Choice F 96DA1B4A-9D6A-8C4E-9148-208ED5BE8B87 A.) a 28 year-old veteran who has returned from duty in Afghanistan and is trying to find a job in the defense industry. B.) a typist who is fired for her inability to master new computer technology. D.) C.) the former employees of Borders Bookstores. E.)

Which of the following individuals would be considered structurally unemployed? iRespond Question Multiple Choice F C69DEA03-A3B2-2B40-ADD3-576471273B23 A.) a recent graduate of Kennesaw State University who is trying to find a job in city engineering. B.) a former major league baseball player who is trying to break back into the big leagues. D.) C.) the employees at a repair shop that specializes in VCR repair. E.)

Which of the following individuals would be considered cyclically unemployed? iRespond Question Multiple Choice F 711B6AC9-B57F-E948-83F4-B94B20F578FA A.) a recent parolee from Coastal State Prison in Savannah, Georgia. B.) a former accounts manager at Wachovia. C.) the former employees of the CD Wherehouse. D.) E.)

Other Considerations An economy is experiencing FULL employment if there is no CYCLICAL unemployment. Many Americans today are UNDEREMPLOYED— They have part-time jobs instead of full time jobs— Or they are OVERQUALIFIED for the job they have. Finally, many Americans have lost their job— And spent months—or years—looking— And then gave up—they are called DISCOURAGED workers. Remember: if you have no job—and are NOT LOOKING for a job—you are not in the work force— And if you aren’t in the work force, you ARE NOT UNEMPLOYED (according to the government).

Business Cycle Peak- Highest point in the Business Cycle Contraction- Stage in which the economy has declining Real GDP Recession- Two quarters (6 Months) of declining Real GDP Trough- Lowest point of the Business Cycle Recovery- Signals end of a Recession with increasing Real GDP Expansion- Growing economy until it reaches a Peak

The Real Business Cycle https://fred.stlouisfed.org/series/GDPC1