Unemployment
Measurement & Analysis
2015 Unemployment Rate
10.2%
Great Recession
On the surface, the
unemployment number
looks good, but……
5.1%
How Is Unemployment Measured?
• The unemployment rate is calculated as the % of the labor force
that is currently unemployed
Unemployment Rate =
# unemployed
Labor force
Labor Force = # people over 16 with jobs +
 100
# people looking for jobs
Calculating Unemployment
# Unemployed
----------------------Labor Force
8.0/157 =
Employed
(149.0 million)
= 5.1%
Adult Population
(251 million)
Unemployed (8.0 million)
Not in labor force
(94.0 million)
Labor Force
(157 million)
Why go to College?
Unemployment by education level in 2015 when overall
unemployment = 5.1%
• Less Than High School:
7.7%
• High School Graduate:
5.5%
• Less Than a Bachelor’s
4.4%
• College Graduate (or higher)
2.5%
4-Types of Unemployment
• Structural
– Unemployed skills do not match current demand for labor
• Cyclical
– Related to business cycle-----too low a level of GDP growth
– occurs during recessions (at trough) or periods of slow GDP growth
• Frictional
– Temporarily between Jobs or new to labor force
• Seasonal
– Out of work based on time of year
Gov’t policy is focused on
Structural & Cyclical
Natural Rate of Unemployment
•
Unemployment that does not go away in long run
Also called “Full Employment” (know this!)
Definition:
–
– Equals the rate without cyclical unemployment
– Also, total of frictional & structural (seasonal is adjusted out of number…)
Economists debate actual % level
We will use 4.5% for this class
Full employment = economy at full potential
Unemployment Worksheet
Cyclical
Structural
4-Types of
Unemployment
Seasonal
Frictional
Low Unemployment & Inflation
As unemployment rate falls
Below full employment
Business competes for workers
Wages begin to increase =>
The cost of doing business rises
Leads to “cost push” inflation
Calculating Full Employment
• Economists debate actual level
– Was considered to be 5-6% before the 1990’s
– 2006 considered 4-5%
We will use
4.5% for
Natural rate
(Full Employment)
Critical Thinking:
Why is it lower today?
Many Reasons:
•
•
•
Improved Job. Info on internet
Temporary Work Agencies
New Welfare Laws
Labor Force Participation: Men versus Women
Labor-Force
Participation
Rate (in percent)
100
80
Men
60
40
Women
20
0
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