1. 15:Employment and Unemployment  What are the unemployment rate, the labor force participation rate, and other labor market measures?  What are the sources and duration of unemployment?  What is full employment?  How are employment and wage rates determined by supply and demand?

2. Vital Signs  The monthly unemployment report is treated as a critical measure of the health of the economy.  To understand the importance of the unemployment rate, we need to know how it is measured and whether it is reliable.

3. Employment and Wages Why do we care??  Real GDP depends on:  the quantities of labor and capital employed  entrepreneurship  the state of technology

4. Population Survey  Every month, the U.S. Census Bureau conducts the Current Population Survey.  This survey covers 60,000 households and is used to estimate:  the size of the working age population  the number of people employed  the number of people unemployed

6. Population Categories  The working-age population is the total number of people 16 years and older who are not in jail, hospital, or some other form of institutional care.  The working-age population is divided into two groups: those in the labor force and those not in the labor force.

7. The Labor Force  The labor force is made up of two groups: the employed and the unemployed.  The number of people in the labor force is the sum of the number employed and the number unemployed.

8. Who Is Employed?  To be counted as employed, a person must have either a full-time or part-time job.  Those with part-time jobs are counted as employed even if they would accept full-time employment if it was offered.

9. Who Is Unemployed?  To be counted as unemployed, a person must be available for work and be in one of three categories:  Without work, but has made specific efforts to find work during the previous four weeks  Waiting to be called back to a job from which he or she has been laid off  Waiting to start a new job within the next 30 days.

10. LS 80 Labor Force Reallocation Labor (millions of people) Real wage rate (1992 dollars per hour) 1830 10.00 LD 80 Services

11. Full Employment  Full employment occurs when the unemployment rate equals the natural rate of unemployment.  The unemployment rate will not be zero at full employment because there will still be frictional and structural unemployment.

13. Explaining Employment and Wage Rates  Demand and Supply in the Labor Market  The labor demand curve shows the quantity of labor that firms plan to hire at each possible real wage rate. Firms attempt to maximize profits

14. Explaining Employment and Wage Rates  Demand and Supply in the Labor Market  The labor supply curve shows the quantity of labor that households plan to supply at each possible real wage rate. Households strive to use their scarce time in the most efficient way

15. The Labor Market Labor (billions of hours per year) Real wage rate (1992 dollars per hour) 14 15 16 0215

16. The Labor Market Labor (billions of hours per year) Real wage rate (1992 dollars per hour) 14 15 16 0215 LD

17. The Labor Market Labor (billions of hours per year) Real wage rate (1992 dollars per hour) 14 15 16 0215 LS LD

18. The Labor Market Labor (billions of hours per year) Real wage rate (1992 dollars per hour) 14 15 16 0215 LS LD

19. The Labor Market Labor (billions of hours per year) Real wage rate (1992 dollars per hour) 14 15 16 0215 LS LD Labor surplus Full employment Labor shortage

20. Explaining Employment and Wage Rates  The Trends in Employment and Wage Rates  Since 1960, aggregate hours has increased from 125 billion to 218 billion in 1996  Real wages increased from $11 an hour to $15 an hour  Technology has made workers more productive  The demand for labor has increased as has the population

21. Explaining Labor Market Trends Labor (billions of hours per year) Real wage rate (1992 dollars per hour) 11.00 15.00 125218300 LD 60 LS 60

22. Explaining Labor Market Trends Labor (billions of hours per year) Real wage rate (1992 dollars per hour) 11.00 15.00 125218300 LD 60 LS 60 LD 96

23. Explaining Labor Market Trends Labor (billions of hours per year) Real wage rate (1992 dollars per hour) 11.00 15.00 125218300 LD 60 LS 96 LS 60 LD 96

24. Explaining Labor Market Trends Labor (billions of hours per year) Real wage rate (1992 dollars per hour) 11.00 15.00 125218300 LD 60 LS 96 LS 60 LD 96

25. Explaining Employment and Wage Rates  Changes in the Distribution of Jobs and Wage Rates  Wage rates of manufacturing nonsupervisory workers has decreased

26. Labor Force Reallocation Labor (millions of people) Real wage rate (1992 dollars per hour) 12.60 18 LS M 2030 LD 80 Manufacturing

27. Labor Force Reallocation Labor (millions of people) Real wage rate (1992 dollars per hour) 12.60 18 LD 80 LS M 20 11.80 30 LD 96 Manufacturing