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Chapter 8 - Unemployment
Macroeconomics: Unemployment and Inflation
21
Economics
03/01/2009

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Term
Misery Index
Definition
Adds together the INFLATION RATE and the UNEMPLOYMENT RATE for a rough measure of the state of the economy.
Term
Current Population Survey
Definition
Referred to as the Household Survey.

60,000 Households, representing the U.S. population, are interviewed about the employment status of everyone in the household 16 years or older.

People are considered employed if they worked the week before the survey was conducted.

People are considered unemployed if they did not work a week before the survey was conducted.
Term
Labor Force
Definition
The SUM of the employed and the unemployed.
Term
Unemployment Rate
Definition

The percentage of the labor force that is unemployed.

 

(Number of Unemployed/Labor Force) x 100 

Term
The Working Age Population
Definition
Anyone 16 years old or older.

Consists of Labor Force and those not in the Labor Force.
Term
People who do not have a job and are currently not looking for a job are classified by the BLS as
Definition
Not in the Labor Force.
Term
BLS
Definition
The Department of Labor's Bureau of Labor Statistics
Term
Those not in the labor force...
Definition

Those not available for work: homemakers, retirees, full-time students, people on active in military service, in prison, or in mental hospitals.

 

People available for work but not currently working:

 

i. Discouraged workers: those available for work but have not looked for a job during the previous four weeks because they believe no jobs are available for them.

 

ii. Those not currently looking because of childcare responsibilities or other problems.

Term
Definition
Term
Labor Force Participation Rate
Definition

The percentage of the working-age population in the labor force.

 

(Labor force/Working-age population) x 100 

Term
Some set backs with measuring unemployment rates...
Definition

1. The BLS counts discouraged workers as not in the labor force rather than unemployed.

 

2. The BLS counts part-time workers as employed.

 

3. Inaccurate responses from the household survey affects the unemployment rate. 

Term
Establishment Survey
Definition

Also known as the payroll survey, it measures employment.

 

Monthly; uses 300,000 business establishments (factory, store, office)

 

Advantages:

Provides information on the total number of persons employed and on a company payroll.

 

 Disadvantages:

 Does not include information on unemployment, self-employed (not on payroll), or those employed in newly opened firms.

 

 

Term
Frictional Unemployment
Definition

Short-term unemployment that arises from the process of matching workers with jobs.

 

People in between jobs and in the process of searching for new ones. 

Term
Seasonal Unemployment
Definition

Linked to frictional unemployment, it is unemployment due to factors such as weather, variations in tourism, and calender-related events.

 

BLS reports two unemployment rates each month--one that is seasonally adjusted and one that isn't. 

Term
How can frictional unemployment be advantageous?
Definition
It increases efficiency: it ensures good matches of worker with job--better productivity.
Term
Structural Unemployment
Definition

More long-term unemployment arising from a persistant mismatch between the skills and characteristics of workers and the requirements of the job.

 

These individuals may lack proper skills for a job and must regain or learn new skills.

 

Some may lack basic skills like literacy or have a drug addiction problem preventing productivity. 

 

 

Term
Cyclical Unemployment
Definition

Unemployment caused by a business cycle recession.

 

In a recession, as sales falls, production is cut back, and firms begin laying off workers.

Term
The economy is at full employment when...
Definition

Only frictional and structural unemployment remain.

 

(aka when cylical unemployment is zero).

 

 

Term
As an economy progresses through an expansion phase, cylical unemployment will...
Definition
eventually drop to zero.
Term
Natural Rate of Unemployment
Definition

The normal rate of unemployment.

 

Frictional Unemployment + Structural Unemployment
Term
Definition