Unemployment Rate An indicator or signal to tell how well the economy is performing Workers make choices that are influenced by incentives If employers think their businesses will expand they hire workers. If employers think their businesses will contract, they let workers go.

Unemployment Rate When workers think job prospects are good, they enter the job market and look for a job. If workers think prospects are poor, they may choose to leave the labor market entirely.

Unemployment Rate Jobs are a concern to Americans Most people rely on a job to earn an income. Loss of a job is devastating for an individual or family.

Unemployment Rates 1990                   4.6

Are these True or False? Employed people are people with jobs. Unemployed people are people without jobs. The civilian labor force is the number of people aged 16 years and older who are not in the armed forces.

Employment Definitions The Bureau of Labor Statistics is the government agency that tracks the number of people who are employed and unemployed. The civilian labor force is the number of people aged 16 years and older who are not in the armed forces and who are employed or are seeking employment

Employment Definitions Employed people are people with jobs. The unemployment rate is the percentage of the civilian labor force that is unemployed. Acceptable rate of unemployment 4-6%

Closing What agency measures and reports the employment and unemployment statistics? Who gets classified as being in the labor force? If I am sick on the day the people from the BLS call, am I in the labor force? If I am in jail, am I in the labor force? If I am a stay –at-home parent, am I in the labor force?

Closing If I have just graduated from high school and have begun looking for a job, without success, am I in the labor force? How is the unemployment rate calculated?

3 types of Unemployment Frictional unemployment  People who are temporarily between jobs.  May have quit one and looking for another  Could be trying to find employment after graduation from high school or college. Cyclical – people who are not working because firms do not need their labor due to lack of demand or downturn in business cycle.  People aren’t buying goods & services, workers are laid off.

3 Types of Unemployment Structural unemployment – mismatch between job seeker and job opening. Unemployed people lack skills or do not have sufficient education are structurally unemployed.

Gross Domestic Product Click on Start on your computer. Click on My Computer. Click on Public on BCHS 2 Click on Squires Courseware Click on Economics. Open the Document GDP Links.  Click on the links and read. Click on the Document GDP.  Click on the link and answer the questions in the Word document by reading the article.

Gross Domestic Product Dollar value on all goods and services produced in the United States. It’s an indicator of economic performance. Includes these areas:  Consumption (consumer spending)  Investments (business and individuals)  Government Spending (includes government buying products from businesses in the product market)  Exports and Imports Equation: GDP=C+I+G+(X-M) Statistics are kept for many years and comparisons are made.

What's not included in GDP? Financial transactions Buying stocks and bonds Services one does for oneself (barber cutting own hair; government payments to individuals)

Another indicator Consumer Price Index Used to calculate inflation. Consumer price index is a means of comparing prices of goods and services from one year to another. The beginning year is called the base year. Includes over 200 categories of products/services. Standard says you are to know how to construct a CPI.

How do we calculate CPI Current Year cost/Base year cost x 100 Multiplying the answer by 100 converts it to a number that is easy to compare to the base year. The base year always has an index of 100.

Example Year 1 (Base Year) Year 2 Basic Market Basket Item No. of Units Price Per Unit Cost of Market Basket Price Per Unit Cost of Market Basket Eggs2 doz Boots2 pair$ Gasoline10 gals.2.25$22.50$ Total Expendi ture

Calculating CPI Year 1 (Base year)  /104.28=1*100= 100 Year 2  /104.28=1.32*100=132 The change between the two years stated as a percentage is known as inflation rate.  What’s the percentage increase between year 2 and year 1?  ( )/100=32% Increase (Inflation rate)

Inflation Increase in the price of goods and services. Acceptable rate of inflation is between 1.5% and 2.5%. To calculate the rate of inflation, use the CPI measures of years and compare them. Current year – Base Year/Base Year *100 = inflation rate percentage.