Unemployment.notebook November 25, 2015 Labor Force Participation - PDF document

Unemployment.notebook November 25, 2015 Labor Force Participation Rate Unemployment Rate # unemployed 100 labor force working age population X 100 labor force Dec. 2014 - 62.7% (BLS.gov) Labor Force = # employed + # unemployed Feb 6­7:47 AM Jan 20­10:20 AM To be unemployed: - Age 16+ -Able to work AND Actively seeking a job in the last month 3 Major Types of Unemployment - NOT institutionalized (jails, hospitals...) - NOT in the military, in school full time, or retired Why is a stay-at-home mom NOT unemployed? Feb 6­7:44 AM Feb 6­7:48 AM Frictional Unemployment Seasonal Unemployment is a specific TYPE of frictional - People are between jobs or looking unemployment. for first job -Relates to time of year and nature of the job. - NORMAL - ALWAYS EXISTS!!! -These jobs come back! - Possess transferrable skills Ex: Professional Santa Impersonators Construction workers in Minnesota Feb 6­7:49 AM Jan 20­9:42 AM 1

Unemployment.notebook November 25, 2015 Structural Unemployment Other causes of structural Wage Structural unemployment: Labor Supply Unemployment Rate - More people are seeking jobs in a labor market than there are jobs available at a particular wage rate 1) Minimum Wage - Changes in the job market make some skills obsolete 2) Labor Unions - These workers DO NOT have transferrable skills 3) Efficiency Wages - and the jobs WILL NOT likely come back employers pay higher wages - Workers must learn NEW skills as an incentive for better - Largely due to CREATIVE DESTRUCTION Labor Demand performance Quantity of Labor Feb 7­7:43 AM Jan 20­10:25 AM The Natural Rate of Unemployment Cyclical Unemployment - results from downturns of the business cycle Frictional and Structural unemployment are unavoidable. - as demand for goods and services falls, demand for Together, they make up the natural rate of unemployment (NRU). labor falls and people are laid off If we ONLY have the NRU then we are at FULL EMPLOYMENT. FULL EMPLOYMENT is the absence of CYCLICAL UNEMPLOYMENT This is the normal amount of unemployment we should have. Number of Job Seekers = Number of Positions Available. Feb 7­7:43 AM Jan 20­9:48 AM The Natural Rate of Unemployment Economists agree that full employment is somewhere around 4-6% NRU=4-6% unemployment NRU in Germany and France is thought to be around 8-10%. Any idea why? Jan 20­9:53 AM Jan 20­10:03 AM 2

Unemployment.notebook November 25, 2015 Problems with the Unemployment Rate Okun's Law Discouraged Workers: Some workers are no longer looking because they have given up. Economist Arthur Okun discovered this empirical relationship between the rate of unemployment and GDP: Underemployed Workers: Some people have part-time work but want full-time. When the unemployment rate rises 1% above NRU, we tend Illegal Labor - Many people work under the table. to see about a 2% drop in GDP. Race/Age Discrepancies: If the unemployment rate is at 8%, according to Okun's Law, Hispanic Workers 5.8% how much has GDP likely fallen? African American Workers 8.9% Teens 15.3% Jan 20­9:55 AM Jan 20­9:58 AM 3