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LABOR MARKET INDICATORS
Current Population Survey
Every month, 1,600 interviewers working on a joint
project of the Bureau of Labor Statistics (BLS) and the
Bureau of the Census survey 60,000 households to
establish the age and job market status of each
member of the household.
Working-age population is the total number of
people aged 16 years and over who are not in a jail,
hospital, or some other form of institutional care or in
the U.S. Armed Forces.
LABOR MARKET INDICATORS
The working-age population is divided into those in the
labor force and those not in the labor force.
Labor force is the number of people employed plus
the number unemployed.
In June 2009, the U.S. labor force was 154.9 million—
140.2 million people were employed and 14.7 million
people were unemployed.
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 not working but who had jobs from which they
were temporarily absent.
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.
LABOR MARKET INDICATORS
Figure 6.1
shows
population
labor force
categories.
The figure
shows the
data for June
2009.
LABOR MARKET INDICATORS
Two Main Labor Market Indicators
• The unemployment rate
• The labor force participation rate
Unemployment rate is the percentage of people in
the labor force who are unemployed.
Unemployment rate =
Number of
people unemployed
x 100
Labor force
In June 2009, the unemployment rate was 9.5 percent.
LABOR MARKET INDICATORS
Labor force participation rate is 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
In June 2009, the labor force participation rate was
65.7 percent.
LABOR MARKET TRENDS AND FLUCTUATIONS
 Unemployment Rate
Figure 6.2
shows the U.S.
unemployment
rate: 1929–2009
The average
unemployment
rate was 5.7
percent.
LABOR MARKET TRENDS AND FLUCTUATIONS
The
unemployment
rate increases in
recessions
and decreases in
expansions.
LABOR MARKET TRENDS AND FLUCTUATIONS
Great
Depression
A period of high
unemployment,
low incomes, and
extreme
economic
hardship that
lasted from 1929
to 1939.
LABOR MARKET TRENDS AND FLUCTUATIONS
The Participation Rate
The participation rate increased from 59 percent in 1959
to 67 percent the 2009.
Between 1959 and 2009, the participation rate for
women increased from 37 percent to 60 percent.
Between 1959 and 2009, the participation rate for men
decreased from 84 percent to 72 percent.
LABOR MARKET TRENDS AND FLUCTUATIONS
Figure shows
the changing
face of the
labor market.
The labor
force
participation
rate of women
has increased.
LABOR MARKET TRENDS AND FLUCTUATIONS
The labor force
participation rate
of men has
decreased.
The average
participation rate
of both sexes has
increased.
UNEMPLOYMENT AND FULL EMPLOYMENT
Types of Unemployment
Frictional unemployment is
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.
For example, a graduate
looking for his first job.
UNEMPLOYMENT AND FULL EMPLOYMENT
Structural unemployment is
the unemployment that arises
when changes in technology or
international competition change
the skills needed to perform jobs
or change the locations of jobs.
For example, telephone
switching is now done by
computer, rather than by
operators. Also, call centers have
been relocated to India.
UNEMPLOYMENT AND FULL EMPLOYMENT
Seasonal unemployment is the unemployment that
arises because of seasonal weather patterns.
For example, farm workers find jobs picking fruit as it
ripens, but once the fruit is picked they are laid off.
Cyclical unemployment is the fluctuating
unemployment over the business cycle that increases
during a recession and decreases during an expansion.
For example, during the recession of 2008–2009, many
workers were laid off as business activity declined.
EYE on THE UNEMPLOYED
How Long Does it Take to Find a New Job?
The table shows the data for:
• 2000 when the U.S. economy
was expanding.
• 2006 when the U.S. economy
was at full employment.
• 2009 when the U.S. economy
was in a deep recession.
These data show that the
number of people unemployed
varies over the business cycle.
EYE on THE UNEMPLOYED
How Long Does it Take to Find a New Job?
Unemployment
does not affect
all demographic
groups in the
same way and
some of the
differences are
large.
The figure
shows some
averages for
2000–2009.
EYE on THE UNEMPLOYED
How Long Does it Take to Find a New Job?
Why are teenage unemployment rates so high?
Two reasons:
Teenagers are still discovering what they are good at, so
they try different jobs and leave their jobs more
frequently than older workers.
Teenagers have little job experience, so firms often hire
them on a short-term or trial basis, which makes the rate
of job loss higher for teenagers than for older workers.
UNEMPLOYMENT AND FULL EMPLOYMENT
Full Employment
Full employment occurs when there is no cyclical
unemployment or, equivalently, when all the
unemployment is frictional, structural, or seasonal.
Natural unemployment rate is the unemployment
rate when the economy is at full employment.
UNEMPLOYMENT AND FULL EMPLOYMENT
Unemployment and Real GDP
Cyclical unemployment is the fluctuating unemployment
over the business cycle—unemployment increases
during recessions and decreases during expansions.
At full employment, there is no cyclical unemployment.
At the business cycle trough, cyclical unemployment is
positive.
At the business cycle peak, cyclical unemployment is
negative.
UNEMPLOYMENT AND FULL EMPLOYMENT
Potential GDP is the level of real GDP that the
economy would produce if it were at full employment.
Because the unemployment rate fluctuates around the
natural unemployment rate, real GDP fluctuates around
potential GDP:
• When the unemployment rate is above the natural
rate, real GDP is below potential GDP.
• When the unemployment rate is below the natural
unemployment rate, real GDP is above potential
GDP.
UNEMPLOYMENT AND FULL EMPLOYMENT
When the economy is at full employment, real GDP
equals potential GDP and there is no output gap.
Output gap equals real GDP minus potential GDP,
expressed as a percentage of potential GDP.
• When the unemployment rate is above the natural
rate, real GDP is below potential GDP and the
output gap is negative.
• When the unemployment rate is below the natural
unemployment rate, real GDP is above potential
GDP and the output gap is positive.
UNEMPLOYMENT AND FULL EMPLOYMENT
Figure shows this
relationship.
The unemployment rate
fluctuates around the
natural unemployment rate:
Falling below the natural
rate when cyclical
unemployment is negative.
Rising above natural rate
when cyclical
unemployment is positive.
6.3 UNEMPLOYMENT AND FULL EMPLOYMENT
As the unemployment rate
fluctuates around the natural
unemployment rate in part
(a), the output gap fluctuates
in part (b).
When the unemployment rate
is below the natural rate, the
output gap is positive.
When the unemployment rate
exceeds the natural rate, the
output gap is negative.