Download 21.1 labor market indicators

CHAPTER CHECKLIST
When you have completed your study of this
chapter, you will be able to
1
Define the unemployment rate and other labor
market indicators.
2
Describe the trends and fluctuations in the
indicators of labor market performance in the
United States.
3
Describe the sources and types of unemployment,
define full employment, and explain the link between
unemployment and real GDP.
21.1 LABOR MARKET INDICATORS
Current Population Survey
Every month, the U.S. Census Bureau surveys 50,000
households to establish the sex, age, and job market
status of each member of the household.
Working-age population
Total number of people aged 16 years and over who are
not in a jail, hospital, or some other form of institutional
care.
21.1 LABOR MARKET INDICATORS
The working-age population is divided into those in the
labor force and those not in the labor force.
Labor force
The number of people employed plus the number
unemployed.
21.1 LABOR MARKET INDICATORS
Population Survey Criteria
The survey counts as employed all persons who, during
the week before the survey:
1. Worked at least 1 hour in a paid job or 15 hours
unpaid in family business.
2. Were did not work but who had jobs from which they
were temporarily absent.
21.1 LABOR MARKET INDICATORS
The survey counts as unemployed all persons who,
during the week before the survey:
1. Had no employment
2. Were available for work,
and either:
1. Had made efforts to find employment during the
previous four weeks, or
2. Were waiting to be recalled to a job from which they
had been laid off.
21.1 LABOR MARKET INDICATORS
Figure 21.1
shows
population
labor force
categories.
The figure
shows the
data for June
2002.
21.1 LABOR MARKET INDICATORS
Two Main Labor Market Indicators
• The unemployment rate
• The labor force participation rate
Unemployment rate
The percentage of people in the labor force who are
unemployed.
Number of
people unemployed
Unemployment rate =
x 100
Labor force
21.1 LABOR MARKET INDICATORS
Labor force participation rate
The percentage of the working-age population who are
members of the labor force.
Labor force
participation rate =
Labor force
Working-age population
x 100%
21.1 LABOR MARKET INDICATORS
Discouraged Workers
Discouraged workers
People available to work but have not made efforts to
find a job within the previous 4 weeks.
21.1 LABOR MARKET INDICATORS
Part-Time Workers
Full-time workers
People who work 35 hours per week.
Part-time workers
People who work less than 35 hours per week.
Involuntary part-time workers
People working 1 to 34 hours per week and are seeking
full-time work.
21.1 LABOR MARKET INDICATORS
Aggregate Hours
The total number of hours worked by all the people
employed during a year.
In June 2002, 135 million people worked an average of
34.7 hours per week.
In the year there are 50 workweeks, so aggregate hours
in 2002 were 234.2 billion.
21.2 LABOR TRENDS AND FLUCTUATIONS
Unemployment
Figure 21.2
shows the U.S.
unemployment
rate: 1962–2002
The average
unemployment
rate between
1962 and 2002
was 5.9
percent.
21.2 LABOR TRENDS AND FLUCTUATIONS
The Participation Rate
The participation rate increased from 59 percent during
the 1960s to 67 percent during the 1990s.
Between 1962 and 2002, the participation rate for
women increased from 38 percent to 60 percent.
Between 1962 and 2002, the participation rate for men
decreased from 82 percent to 74 percent.
21.2 LABOR TRENDS AND FLUCTUATIONS
Figure 21.3
shows the
changing
face of the
labor market.
The labor
force
participation
rate of women
has increased.
21.2 LABOR TRENDS AND FLUCTUATIONS
The labor force
participation
rate of men
has decreased.
The average
participation
rate of both
sexes has
increased.
21.2 LABOR TRENDS AND FLUCTUATIONS
Part-Time Workers
Part-time work is attractive to workers because they:
• Balance family with work
Part-time work is attractive to employers because:
• Benefits are not paid to part-time workers
• Less government regulation of part-time workers
21.2 LABOR TRENDS AND FLUCTUATIONS
Figure 21.4
shows parttime workers
from 1972 to
2002.
Part-time
workers up
from 16
percent of
labor force in
1972 to 17
percent
in 2002.
21.2 LABOR TRENDS AND FLUCTUATIONS
The figure
also shows
involuntary
part-time
workers.
Involuntary
part-time work
peaked during
the 1982
recession.
21.2 LABOR TRENDS AND FLUCTUATIONS
Aggregate and Average Hours
Between 1960 and 2000, the number of people
employed doubled (up 105 percent) but aggregate
hours increased by only 84 percent.
The reason: average hours per worker decreased.
21.2 LABOR TRENDS AND FLUCTUATIONS
Figure 21.5(a)
shows aggregate
hours: 1962–2002
Between 1962
and 2002,
aggregate hours
increased by an
average of 1.5
percent a year.
21.2 LABOR TRENDS AND FLUCTUATIONS
Figure 21.5(b)
shows average
weekly hours from
1962 to 2002.
21.3 UNEMPLOYMENT
Sources of Unemployment
People who become unemployed are:
• Job losers—people who are laid off from their jobs
• Job leavers—people who voluntarily quit their jobs
• Entrants and reentrants—people who have just left
school or who are now looking for a job after a
period out of the labor force.
21.3 UNEMPLOYMENT
Figure 21.6
shows
unemployment
by reasons.
Job losers are
the biggest
group, and
their number
fluctuates
most.
21.3 UNEMPLOYMENT
How Unemployment Ends
People who end a period of unemployment are either:
• Hires and recalls—people who have been hired in
a new job or recalled after a temporary layoff.
• Withdrawals—people who have stopped looking
for jobs.
21.3 UNEMPLOYMENT
Figure 21.6 summarizes the labor market flows.
21.3 UNEMPLOYMENT
Job losers and job leavers become unemployed or leave the labor force.
21.3 UNEMPLOYMENT
Entrants and reentrants become unemployed or get jobs.
21.3 UNEMPLOYMENT
Unemployment ends when a person is hired or recalled….
21.3 UNEMPLOYMENT
… or when a person withdraws from the labor force.
21.3 UNEMPLOYMENT
Types of Unemployment
Frictional unemployment
The unemployment that arises from normal labor
turnover—from people entering and leaving the labor
force and from the ongoing creation and destruction of
jobs.
Structural unemployment
The unemployment that arises when changes in
technology or international competition change the skills
needed to perform jobs or change the locations of jobs.
21.3 UNEMPLOYMENT
Seasonal unemployment
The unemployment that arises because of seasonal
weather patterns.
Cyclical unemployment
The fluctuating unemployment over the business cycle
that increases during a recession and decreases during
an expansion.
21.3 UNEMPLOYMENT
Duration and Demographics of
Unemployment
Figure 21.8(a) compares
the duration of
unemployment in 2000
with 1983
The average duration of
unemployment varies
over the business cycle.
21.3 UNEMPLOYMENT
Duration and Demographics of
Unemployment
The average
unemployment rate was
less in 2000 than in
1983.
The lower the average
unemployment rate, the
shorter is the average
duration of
unemployment.
21.3 UNEMPLOYMENT
Figure 21.8(b) shows
unemployment
demographics.
Black unemployment
is more than twice that
of white.
Teenage unemployment
is three times that of
workers aged 20 and
over.
21.3 UNEMPLOYMENT
Full Employment
Full employment
When there is no cyclical unemployment or,
equivalently, when all the unemployment is frictional or
structural.
Natural unemployment rate
The unemployment rate at full employment.
21.3 UNEMPLOYMENT
Unemployment and Real GDP
Because the unemployment rate fluctuates around the
natural rate, real GDP fluctuates around potential GDP.
Potential GDP
The level of real GDP that the economy would produce
if it were at full employment.
When the unemployment rate is above the natural rate,
real GDP is below potential GDP.
When the unemployment rate is below the natural rate,
real GDP is above potential GDP.
21.3 UNEMPLOYMENT
Figure 21.9(a)shows the
relationship between
unemployment and real
GDP.
As the unemployment
rate fluctuates
around the natural rate
unemployment
(part a), real GDP
fluctuates around
potential GDP (part b).