1. Opening Questions (Discuss in Small Groups) 1.How would you characterize the relationship between GDP and Unemployment? 2.Which demographic groups, if any, might have higher than average unemployment rates? 3.How well do you think the unemployment rate captures the true picture of joblessness in the economy?

2. Employment Consequences and Calculations Modules 12 and 13

3. Figure 12.1 The U.S. Unemployment Rate, 1948–2010 Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers

4. Figure 12.5 Growth and Changes in Unemployment, 1949–2009 Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers

5. Labor Force Participation Percentage of civilian population 16 years or older who are part of the labor force

6. Figure 12.2 Alternative Measures of Unemployment, 1994–2010 Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers

7. Workers Not Counted Underemployed – Working part time, but want full time – “Part-time for Economic Reasons” Not in labor force – Marginally-attached workers Would like a job, but have not looked in past 4 weeks Discouraged workers – Believe there is no job for them

8. Figure 12.3 Unemployment Rates of Different Groups, 2007 Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers

9. Unnumbered Figure 12.1 Rocky Mountain Low Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers

11. Employment Labor Force = Employed + Unemployed Employed Work for pay OR 15 hours of unpaid work in family business OR Temporarily absent from work Unemployed Did no work for pay or profit Actively looked for work Available for work Not Counted in Labor Force Under 16 Institutionalized (military; prison) People who have stopped seeking work

12. Figure 13.1 Distribution of the Unemployed by Duration of Unemployment, 2000 and 2010 Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers

13. Components of Unemployment Frictional Seasonal Structural Cyclical

14. Components of Unemployment Frictional – In between jobs Seasonal – Unemployment due to time of year

15. Components of Unemployment Structural – More job seekers than jobs available at a given wage rate – Persistent unemployment due to skills mismatch – Declining industries – Wages Minimum wage Unions Efficiency wages

16. Figure 13.2 The Effect of a Minimum Wage on the Labor Market Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers

17. Natural Unemployment Rate “Ordinary” level of unemployment – Frictional + Structural For USA it is currently about 5.5%

19. What Affects Natural Rate? Labor force characteristics Labor markets effects that result in higher wages – Minimum wage – Unions Technology helps reduce frictional unemployment Job training and employment subsidies

20. Figure 13.3 The Changing Makeup of the U.S. Labor Force, 1948–2009 Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition Copyright © 2011 by Worth Publishers

21. Cyclical Unemployment Unemployment that is the result of the business cycle (recessions) Cyclical Unemployment = Actual Unemployment – Natural Unemployment