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Meaning & Calculation of Unemployment

Meaning & Calculation of Unemployment. Objectives:. How is unemployment measured and calculated? What is the relationship between the unemployment rate and economic growth?. Defining & Measuring Unemployment.

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Meaning & Calculation of Unemployment

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  1. Meaning & Calculation of Unemployment

  2. Objectives: • How is unemployment measured and calculated? • What is the relationship between the unemployment rate and economic growth?

  3. Defining & Measuring Unemployment • Employed – people are currently holding a job in the economy, either full-time or part time • Unemployed – people are actively looking for work but aren’t currently employed • “jobless, looking for jobs, available for work” • Retired people don’t count • Disabled people don’t count • An individual is considered unemployed if he or she doesn’t currently have a job and has been actively seeking a job during the past four weeks

  4. Defining & Measuring Unemployment • Labor Force – sum of the employed and the unemployed • People who are currently working and the people who are currently looking for work • Labor force participation rate is the share of the working-age population that is in the labor force

  5. Unemployment Rate The labor force participation rate is the percentage of the population aged 16 or older that is in the labor force. • The unemployment rate is the percentage of the total number of people in the labor force who are unemployed.

  6. Significance of the Unemployment Rate • Unemployment rate is low, nearly everyone who wants a job can find one • Discouraged workers are nonworking people who are capable of working but have given up looking for a job given the state of the job market. • Marginally attached workers would like to be employed and have looked for a job in the recent past but are not currently looking for work. • Underemployment is the number of people who work part time because they cannot find full-time jobs.

  7. Unemployment Rate Alternative Measures of Unemployment, 1994-2008 Percentage of labor force 12% 10 8 6 4 2 1994 1996 1998 2000 2002 2004 2006 2008 Year

  8. Unemployment Rate Unemployment Rates of Different Groups, 2007 Unemployment rate 35% 30 25 20 15 10 5 0 31.2% 14.4% 7.7% 4.7% African-Amerian teenager Overall African-Amerian White teenager

  9. Unemployment Rate Unemployment and Recessions, 1978-2008 Unemployment Rate 12% 10 8 6 4 2 1980 1985 1990 1995 2000 2005 2008 Year

  10. Growth & Unemployment • Periods of economic expansion, the unemployment rate usually falls • But….economic expansions aren’t always periods of falling unemployment • Because…..the economy can be growing, but not always growing fast enough to reduce the unemployment rate

  11. Remember: Falling real GDP equals rising rate of unemployment

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