Unemployment Calculations McConnell & Brue

Labor Force & Unemployment Labor force: persons 16 and older who are not in institutions who are either employed or actively seeking work Labor force participation rate: # in the labor force/adult population x100 Employed: An individual who did any paid or profit work in a week (or family employment) Unemployed: Over 16, haven’t worked for pay/profit in a week, actively seeking a job Employment rate: # currently employed/working age population x 100 Unemployment rate: # currently unemployment/labor force x100

Classroom Interview Questions 1. Are you either under age 16 or retired (over 65 and not working)? [if yes, not in labor force; if no, continue] 2. Are you institutionalized or in the military, or do you have a disability that prevents you from work? [if yes, not in labor force; if no, continue] 3. Have you done any work for pay or profit in the past week? [if yes, labor force-employed; if no, continue] 4. Have you done any unpaid work for a family farm or business in the past week? [if yes, labor force-employed; if no, continue] 5. Last week, did you have a job? Include any job from which you were temporarily absent. [if yes, labor force-employed; if no, continue] 5. Last week, were you on layoff from a job? [if yes, labor force – unemployed; if no, continue] 6. Have you made any effort to find a job in the past 4 weeks? [if yes, continue; if no, not in labor force] 7. Last week, could you have started a job if one was offered? [if yes, labor force-unemployed; if no, not in labor force]

Types of Unemployment Frictional – between jobs, looking for a first job, typically a choice Structural – displaced, often due to technology, lacking skills for available jobs, not a choice (creative destruction) Cyclical – layoffs due to a downturn in the business cycle (25% in 1933) Natural Rate of Unemployment – assumes you will always have frictional and structural unemployment

Unemployment Graphics Geography of a Recession Interactive Unemployment Rates