ECO285 - ECO285 - MacroeconomicsMacroeconomics

Dr. Dennis FosterDr. Dennis Foster

The NatureThe Natureand Concepts and Concepts

of of UnemploymentUnemployment

peak

trough

recoverycontraction

UnemploymeUnemploymentnt

Measured rate depends on– the population,

– the civilian population,

– the civilian population over 16 yrs. old (&…),

– the labor force,

– and whether one is looking for work.

January 2015 - Getting from A to Z

Who is employed Who is employed & who is & who is

unemployed?unemployed?

To be unemployedunemployed, you have to be:• in the labor force• willing to work• able to work• and looking for work

To be employedemployed, you have to be working (!)• at least 1 hour during survey week• or, absent from work due to illness/vacation/strike• on a maternity leave• are an unpaid family member

Data – Unemployment Rate (Ur) = (#unemployed)/(#labor force)

5.7%

5.1%

Data – seasonal adjustments

To remove the influence of predictable seasonal fluctuations, such as:– Students graduating in May and entering the

labor force.– Christmas shopping season and temporary

boost in employees.– Other seasonal activities – Snowbowl, Grand

Canyon, et al.– Typical weather-related effects on

employment.– Other holiday effects.

All the data you see is adjusted.

Why do people become unemployed?

Good News for You!Good News for You!

A paradox about A paradox about unemploymentunemployment

Yes!!!Yes!!!

If the labor force is rising at the same time.If the labor force is rising at the same time.

For example: UFor example: Ur r = 5,000/100,000 = = 5,000/100,000 = 5%,5%,

and, now Uand, now Ur r = 7,500/110,000 = = 7,500/110,000 = 6.82%,6.82%,

Can the number of people Can the number of people employed rise at the same employed rise at the same time as the unemployment time as the unemployment

rate rises?rate rises?

Labor Force, employed, unemployed, Ur rate +10,000 +7,500 +2,500

Unemployment Unemployment TypesTypes

Frictional UnemploymentFrictional Unemployment People between jobs (quit, fired, new entrants,

reentrants) Normal and necessary (!) Most unemployed find jobs quickly.

Structural UnemploymentStructural Unemployment Permanent job loss (technological change, trade

effects) Economic growth exacerbates this.

Cyclical UnemploymentCyclical Unemployment• Temporary unemployment due to recession.• Generally, the focal point of government fiscal policy.

Seasonal UnemploymentSeasonal Unemployment

• Examples: Snowbowl, Agriculture …

• Data adjusts for seasonal variation.

Induced UnemploymentInduced Unemployment

• Due to government policies.

• Examples: Min. wage, Housing regs., ObamaCare

• May work the other way: Airline deregulation in 1980 boosted employment about 50% soon thereafter.

Unemployment Types: Unemployment Types: Special Cases

ECO285 - ECO285 - MacroeconomicsMacroeconomics

Dr. Dennis FosterDr. Dennis Foster

The NatureThe Natureand Concepts and Concepts

of of UnemploymentUnemployment

peak

trough

recoverycontraction