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Jobs and Unemployment LABOR MARKET INDICATORS Two Sources of Employment Data in the US 1. Current Employment Statistics (establishment survey) 2. Current Population Survey (household survey) LABOR MARKET INDICATORS Current Employment Statistics A survey of payroll records that covers over 300,000 businesses on a monthly basis and provides detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls for the Nation. Employment is the total number of persons on establishment payrolls employed full or part time - including temporary and intermittent employees – data exclude proprietors, self-employed, unpaid family or volunteer workers, farm workers, and domestic workers. Government employment covers only civilian workers. LABOR MARKET INDICATORS Current Employment Statistics National estimates of average weekly hours and average hourly earnings are made for the private sector, with detail for about 850 industries as well as for overtime hours in manufacturing. The CES survey does not collect occupational information. Occupational employment information is collected as part of the Current Population Survey LABOR MARKET INDICATORS Current Population Survey Every month, the U.S. Census Bureau surveys about 60,000 households to establish the sex, age, and job market status of each member of the household. The sample is selected to reflect the entire civilian noninstitutional population. Based on responses to a series of questions on work and job search activities, each person 16 years and over in a sample household is classified as employed, unemployed, or not in the labor force. 21.1 LABOR MARKET INDICATORS Current Population Survey 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. 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 Jan. 2004 Civilian Non-Institutional Population (222,161,000) Civilian NonInstitutional 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100 % Civilian Non-Institutional Population Not in the Labor Force 75,298,000 Unemployed 8,297,000 Employed 138,566,000 21.1 LABOR MARKET INDICATORS Differences in employment estimates: --The household survey includes agricultural workers, the self-employed, unpaid family workers, and private household workers among the employed. These groups are excluded from the establishment survey. --The household survey includes people on unpaid leave among the employed. The establishment survey does not. --The household survey is limited to workers 16 years of age and older. The establishment survey is not limited by age. --The household survey has no duplication of individuals, because individuals are counted only once, even if they hold more than one job. In the establishment survey, employees working at more than one job and thus appearing on more than one payroll would be counted separately for each appearance. 21.1 LABOR MARKET INDICATORS Employment Data: CPS and CES Sources 400,000 200,000 0 Employed - Current Population Survey Jan. 2003 Sept. 2003 Oct. 2003 Nov. 2003 Dec. 2003 Jan. 2004 219,897 221,779 222,039 222,279 222,509 222,161 130,190 129,856 129,944 130,027 130,043 130,155 Employed - Current Employment Statistics 21.1 LABOR MARKET INDICATORS Change in Jobs: CPS and CES sources 500,000 0 -500,000 Sept. 2003 Oct. 2003 Nov. 2003 Dec. 2003 Jan. 2004 197,000 451,000 438,000 -54,000 87,000 Change in Jobs (CES -334,000 survey) 88,000 83,000 16,000 112,000 Change in Jobs (CPS survey) 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 Historic Unemployment Rate 19 40 19 45 19 50 19 55 19 60 19 65 19 70 19 75 19 80 19 85 19 90 19 95 20 00 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 21.1 LABOR MARKET INDICATORS Recent Unemployment Rate Trend 6.2% 6.0% 5.8% 5.6% 5.4% 5.2% Unemployment Rate Jan. Sept. Oct. Nov. Dec. Jan. 5.8% 6.1% 6.0% 5.9% 5.7% 5.6% 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 Jan. 2004 Civilian Non-Institutional Population (222,161,000) Civilian NonInstitutional 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100 % Civilian Non-Institutional Population Not in the Labor Force 75,298,000 Unemployed 8,297,000 Employed 138,566,000 21.1 LABOR MARKET INDICATORS Labor Force Participation Rate 2002 1998 1994 1990 1986 1982 1978 1974 1970 1966 1962 1958 1954 1950 1946 1942 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 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. 21.1 LABOR MARKET INDICATORS Recent Labor Force Participation 66.4% 66.3% 66.2% 66.1% 66.0% 65.9% 65.8% Labor Force Participation Rate Jan. 2003 Sept. 2003 Oct. 2003 Nov. 2003 Dec. 2003 Jan. 2004 66.3% 66.1% 66.2% 66.2% 66.0% 66.1% 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. Discouraged workers are NOT a part of the labor force. 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 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. 21.1 LABOR MARKET INDICATORS Avg. Weekly Hours Worked 33.9 33.8 33.7 33.6 33.5 33.4 33.3 Avg. Weekly Hours Worked Jan. 2003 Sept. 2003 Oct. 2003 Nov. 2003 Dec. 2003 Jan. 2004 33.8 33.6 33.7 33.8 33.5 33.7 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 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 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 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).