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Unemployment

Unemployment. 9.7%. Measurement & Analysis. Number une. mployed. ´. Unemployme. nt rate. =. 100. Labor forc. e. How Is Unemployment Measured?. The unemployment rate is calculated as the percentage of the labor force that is unemployed. Labor Force includes people over 16

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Unemployment

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  1. Unemployment 9.7% Measurement & Analysis

  2. Number une mployed ´ Unemployme nt rate = 100 Labor forc e How Is Unemployment Measured? • The unemployment rate is calculated as the percentage of the labor force that is unemployed. Labor Force includes people over 16 with a job or looking for a job

  3. Employed Labor Force (136.4 million) (151 million) Adult Population (228.7 million) Unemployed (14.6 million) Not in labor force (77.0 million) Breakdown by Population Unemployment Rate Calculation: 14.6/151 = = 9.7%

  4. Why go to College? Unemployment by education level in 2010 when overall unemployment = 9.6% • Less Than High School: 15.6% • High School Graduate: 10.5% • Less Than a Bachelor’s 8.0% • College Graduate 5.0%

  5. 4-Types of Unemployment • Structural • Skills do not match demand for labor • Cyclical • Related to business cycle-----too low a level of GDP growth (occurs during recessions or periods of slow growth) • Frictional • Temporarily between Jobs or new to labor force • Seasonal • Out of work based on time of year

  6. Natural Rate of Unemployment • What: Unemployment that does not go away in long run • Also called “Full Employment” (know this!) • Equals the rate withoutcyclical unemployment • Also, total of frictional & structural(seasonal is adjusted out)

  7. We will use 4.5% for Natural rate (Full Employment) Critical Thinking: Why is it lower today? Calculating the Natural Rate • Economists debate actual level • Was considered to be 5-6% before the 1990’s • 2006 considered 4-5% • Many Reasons: • Improved Job. Info on internet • Temporary Work Agencies • New Welfare Laws

  8. Low Unemployment & Inflation Business competes for workers Wages begin to increase => The cost of doing business rises Leads to “cost push” inflation As unemployment rate falls Below full employment

  9. Unemployment rate Natural rate of unemployment Unemployment Rate vs. Natural Rate When is the economy clearly strong below? Percent of Labor Force 10 8 6 4 If unemployment rate is less than Full Employment, things are good! 2 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 BUT!---inflationary pressures rise

  10. Cyclical Structural 4-Types of Unemployment Seasonal Frictional

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