LABOR MARKET INDICATORS

1. 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.

2. 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.

3. 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.

4. 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.

5. LABOR MARKET INDICATORS Figure 6.1 shows population labor force categories. The figure shows the data for June 2009.

6. Number of people unemployed Unemploymentrate = x 100 Labor force 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. In June 2009, the unemployment rate was 9.5 percent.

7. Labor force Labor force participation rate = x 100 Working-age population LABOR MARKET INDICATORS • Labor force participation rate is the percentage of the working-age population who are members of the labor force. • In June 2009, the labor force participation rate was 65.7 percent.

8. 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.

9. LABOR MARKET TRENDS AND FLUCTUATIONS The unemployment rate increases in recessions and decreases in expansions.

10. LABOR MARKET TRENDS AND FLUCTUATIONS Great Depression A period of high unemployment, low incomes, and extreme economic hardship that lasted from 1929 to 1939.

11. 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.

12. LABOR MARKET TRENDS AND FLUCTUATIONS Figure shows the changing face of the labor market. The labor force participation rate of women has increased.

13. LABOR MARKET TRENDS AND FLUCTUATIONS The labor force participation rate of men has decreased. The average participation rate of both sexes has increased.

14. 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.

15. 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.

16. 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.

17. 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.

18. 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.

19. 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.

20. 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.

21. 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.

22. 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.

23. 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.

24. 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.

25. 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.