unemployment

Copyright©2004South-Western28UnemploymentandItsNaturalRateCopyright©2004South-WesternIDENTIFYINGUNEMPLOYMENT•CategoriesofUnemployment•Theproblemofunemploymentisusuallydividedintotwocategories.•Thelong-runproblemandtheshort-runproblem:•Thenaturalrateofunemployment•ThecyclicalrateofunemploymentCopyright©2004South-WesternIDENTIFYINGUNEMPLOYMENT•NaturalRateofUnemployment•Thenaturalrateofunemploymentisunemploymentthatdoesnotgoawayonitsowneveninthelongrun.•Itistheamountofunemploymentthattheeconomynormallyexperiences.Copyright©2004South-WesternIDENTIFYINGUNEMPLOYMENT•CyclicalUnemployment•Cyclicalunemploymentreferstotheyear-to-yearfluctuationsinunemploymentarounditsnaturalrate.•Itisassociatedwithwithshort-termupsanddownsofthebusinesscycle.Copyright©2004South-WesternIDENTIFYINGUNEMPLOYMENT•DescribingUnemployment•ThreeBasicQuestions:•Howdoesgovernmentmeasuretheeconomy’srateofunemployment?•Whatproblemsariseininterpretingtheunemploymentdata?•Howlongaretheunemployedtypicallywithoutwork?Copyright©2004South-WesternHowIsUnemploymentMeasured?•UnemploymentismeasuredbytheBureauofLaborStatistics(BLS).•Itsurveys60,000randomlyselectedhouseholdseverymonth.•ThesurveyiscalledtheCurrentPopulationSurvey.Copyright©2004South-WesternHowIsUnemploymentMeasured?•Basedontheanswerstothesurveyquestions,theBLSplaceseachadultintooneofthreecategories:•Employed•Unemployed•NotinthelaborforceCopyright©2004South-WesternHowIsUnemploymentMeasured?•TheBLSconsidersapersonanadultifheorsheisover16yearsold.Copyright©2004South-WesternHowIsUnemploymentMeasured?•Apersonisconsideredemployedifheorshehasspentmostofthepreviousweekworkingatapaidjob.Copyright©2004South-WesternHowIsUnemploymentMeasured?•Apersonisunemployedifheorsheisontemporarylayoff,islookingforajob,oriswaitingforthestartdateofanewjob.Copyright©2004South-WesternHowIsUnemploymentMeasured?•Apersonwhofitsneitherofthesecategories,suchasafull-timestudent,homemaker,orretiree,isnotinthelaborforce.Copyright©2004South-WesternHowIsUnemploymentMeasured?•LaborForce•Thelaborforceisthetotalnumberofworkers,includingboththeemployedandtheunemployed.•TheBLSdefinesthelaborforceasthesumoftheemployedandtheunemployed.Figure1TheBreakdownofthePopulationin2001Copyright©2003Southwestern/ThomsonLearningAdultPopulation(211.9million)LaborForce(141.8million)Employed(135.1million)Notinlaborforce(70.1million)Unemployed(6.7million)Copyright©2004South-WesternHowIsUnemploymentMeasured?•Theunemploymentrateiscalculatedasthepercentageofthelaborforcethatisunemployed.Unemploymentrate=NumberunemployedLaborforce100Copyright©2004South-Western•Thelabor-forceparticipationrateisthepercentageoftheadultpopulationthatisinthelaborforce.HowIsUnemploymentMeasured?LaborforceparticipationrateLaborforceAdultpopulation100Table1TheLabor-MarketExperiencesofVariousDemographicGroupsCopyright©2004South-WesternFigure2UnemploymentRateSince1960Copyright©2003Southwestern/ThomsonLearning108642019701975196019651980198519902005PercentofLaborForce19952000NaturalrateofunemploymentUnemploymentrateFigure3LaborForceParticipationRatesforMenandWomenSince1950Copyright©2003Southwestern/ThomsonLearning1008060402001950195519601965197019751980198519902000Labor-ForceParticipationRate(inpercent)WomenMen1995Copyright©2004South-WesternDoestheUnemploymentRateMeasureWhatWeWantItTo?•Itisdifficulttodistinguishbetweenapersonwhoisunemployedandapersonwhoisnotinthelaborforce.•Discouragedworkers,peoplewhowouldliketoworkbuthavegivenuplookingforjobsafteranunsuccessfulsearch,don’tshowupinunemploymentstatistics.•Otherpeoplemayclaimtobeunemployedinordertoreceivefinancialassistance,eventhoughtheyaren’tlookingforwork.Copyright©2004South-WesternHowLongAretheUnemployedwithoutWork?•Mostspellsofunemploymentareshort.•Mostunemploymentobservedatanygiventimeislong-term.•Mostoftheeconomy’sunemploymentproblemisattributabletorelativelyfewworkerswhoarejoblessforlongperiodsoftime.Copyright©2004South-WesternWhyAreThereAlwaysSomePeopleUnemployed?•Inanideallabormarket,wageswouldadjusttobalancethesupplyanddemandforlabor,ensuringthatallworkerswouldbefullyemployed.Copyright©2004South-WesternWhyAreThereAlwaysSomePeopleUnemployed?•Frictionalunemploymentreferstotheunemploymentthatresultsfromthetimethatittakestomatchworkerswithjobs.Inotherwords,ittakestimeforworkerstosearchforthejobsthatarebestsuittheirtastesandskills.Copyright©2004South-WesternWhyAreThereAlwaysSomePeopleUnemployed?•Structuralunemploymentistheunemploymentthatresultsbecausethenumberofjobsavailableinsomelabormarketsisinsufficienttoprovideajobforeveryonewhowantsone.Copyright©2004South-WesternJOBSEARCH•Jobsearch•theprocessbywhichworkersfindappropriatejobsgiventheirtastesandskills.•resultsfromthefactthatittakestimeforqualifiedindividualstobematchedwithappropriatejobs.Copyright©2004South-WesternJOBSEARCH•Thisunemploymentisdifferentfromtheothertypesofunemployment.•Itisnotcausedbyawageratehigherthanequilibrium.•Itiscausedbythetimespentsearchingforthe“right”job.Copyright©2004South-WesternWhySomeFrictionalUnemploymentisInevitable•Searchunemploymentisinevitabl