1. The Meaning and Calculation of Unemployment

2. The Unemployment Rate

3. Defining and Measuring Unemployment
Employed
working
Unemployed
to be without work and to be actively seeking employment
Unemployment rate
Percentage of people in the labor force who are unemployed

4. Defining and Measuring Unemployment
Labor force
the sum of the employed and the unemployed.
Labor force participation rate
the share of the working-age population in the labor force
Unemployment Rate
The number of unemployed workers in the labor force

5. UNEMPLOYMENT Measurement of Unemployment, 2009 Under 16 and/or
institutionalized
71,400,000
Not in
labor
force
81,700,000
Total
Population
307,300,000
Employed
139,900,000
Labor
force
154,200,000
Unemployed
14,300,000

6. Problems with the Unemployment Rate
Unemployment may be overstated due to people waiting to take jobs even though jobs available.
Unemployment may be understated due to discouraged workers, marginally attached workers and the underemployed.

7. Problems with Unemployment Rate
Discouraged workers: those who have become so frustrated and stopped looking are no longer considered unemployed
Marginally attached: those who have looked recently but are not currently looking
Underemployed. Those who work minimally (at least one hour) are considered employed. Also many people take jobs below their skill level.

8. Meaning of Unemployed

9. Who’s Employed and Who’s Not Classify each of the following individuals as EMPLOYED, UNEMPLOYED or NOT IN THE LABOR FORCE
Steve worked forty hours last week in a music supply store.
Sergio, a classically trained musician, can only find work playing for local parties.
Anthony, a schoolteacher, is not working during his three-month summer break.

10. Renee lost her job at the R-Gone Manufacturing Company
Renee lost her job at the R-Gone Manufacturing Company. After searching for 6 months, Renee gave up looking last month.
Natasha, a graduate student, went back to school because jobs were scarce.
Raj is taking a year off from work to stay home with his daughter.
Raj’s father is unable to work.

11. Scott has a Ph.D.. He worked full-time but doesn’t like his job as a dishwasher.
Mary-Helen has been out of work for a full year. She was looking for a job up until last month. She is not actively searching for work right now.

12. Variations in Unemployment Rates
Work easier to find in “prime” age group of 25-54
Teenagers and minority groups have the highest unemployment rates

13. Types of Unemployment
Frictional unemployment is also known as job search unemployment
These people are temporarily between jobs. (ex: recent graduates, those who have relocated, those looking for a better job)
These people have skills and there are jobs available for them
Seasonal unemployment (subset of frictional unemployment)
workers who due to weather or other variations are not working presently

14. Types of Unemployment
Structural unemployment involves mismatches between job seekers and job openings at current wage rate.
Causes
People lack skills demanded (technological innovation)
Minimum wage laws
Labor unions
Efficiency wages
Side effects of public policy

15. Types of Unemployment
Cyclical unemployment is caused by recessions. People aren’t buying goods so workers are laid off.

16. Types of Unemployment Decide which of the following types each scenario describes: frictional, seasonal, structural or cyclical
A Wisconsin construction worker cannot find work in the winter
A steelworker is laid off because of a long recession
A computer programmer quits her job in Chicago to look for a new job in San Diego
A store clerk loses her job because sales are slow during a business slump

17. A high school dropout applies for several jobs but is told each time that he is not qualified.
An unemployed college senior is looking for her first job.
An unemployed auto worker has been replaced by a robot.
A person rejects a job offer because the wage is too low.

18. Full Employment Rate a.k.a. Natural Rate of Unemployment
It is the lowest possible unemployment rate with the economy growing (maximum potential employment) .
It takes into account unavoidable unemployment such as structural and frictional, but not cyclical.
It is considered to be about 5% unemployed.
If the current unemployment rate is 8.3%, how much is due to cyclical unemployment?

19. Changes in the Natural Rate of Unemployment
The natural rate of unemployment changes over time and across national borders.

20. Changes in Natural Rate of Unemployment
Causes
Changes in labor force characteristics
Experienced vs inexperienced workforce
Changes in labor market institutions
Labor union membership
Temp employment agencies and online job search
Demand for skilled vs unskilled labor
Changes in government policies
Income security vs job training