Jobs and Unemployment
Outline
1. The labor force
2. The labor force participation rate
3. The unemployment rate
4. Sources of unemployment
5. Types of unemployment
6. The social and economic costs of unemployment
Definitions
•Working-age population: The total number of people aged
16 years and older who are not in jail, hospital, or other form
of institutional care.
•Labor force: The number of people employed plus the
number unemployed.
•Unemployment rate: The percentage of the people in the
labor force who are unemployed.
•Labor force participation rate: The percentage of the
working-age population that is in the labor force.
The Current Population Survey counts all
persons as unemployed who, during the
week before the monthly survey
1. Had no employment,
2. Were available for work,
and either
1. Had made specific efforts to find
employment some time during the
previous 4 weeks or
2. Were waiting to be recalled to a job from
which they had been laid off.
Labor force does not include
Discouraged Workers
People who are available and willing to work
but have not made specific efforts to find a job
within the previous four weeks.
Employment statistics for the U.S.,
June 2003 (in thousands)
Civilian Non-institutionalized
population (16 and older)
Civilian Labor Force
Employed
Unemployed
Not in the Labor Force
221,014
147,096
137,738
9,358
73,918
Thus, the unemployment rate
is given by:
unemployed
9,358

U 
100 
100  6.4%
laborforce
147,096
Source: www.stats.bls.gov
Recession is shaded
23.5 million new jobs
have were added in the
U.S. 1991 and 2000.
However, the U.S. lost
2,113,000 jobs between
March 2001 and April
of 2002.
Recession is
shaded
Recessions are shaded
Source: www.bls.gov
Recession is shaded
Source: www.bls.gov
Recessions are shaded
Recessions are shaded
Recessions are shaded
Unemployment in Selected Countries
12
10
8
6
4
te
ni
U
May, 2002
d
St
es
at
s
nd
Source: The Economist, June 28, 2003
la
er
Country
h
et
N
n
pa y
Ja an
m
er
G
ce
an
Fr ark
m
en
D
a
ad
an
C
in
ita
Br
ria
st
Au lia
ra
st
Au
2
May, 2003
Unemployment Rates by Age, Race, and Sex
June 2003
19
16-19 Yrs.
12
Blacks
8
Hispanics or Latinos
7
Men
6
Overall
6
Whites
Women
6
0
5
10
15
Percent
Source: Bureau of Labor Statistics
20
25
30
Labor Force Participation Rates in the U.S.
90
80
70
60
50
MEN
40
WOMEN
30
16-19 Years
1960
1965
1970
1975
1980
1985
1990
1995
YEAR
Source: Bureau of Labor Statistics
2000
Full-time versus Part-time
•Full-time workers: People who normally work 35
hours or more per week.
•Part-time workers: people who normally work
less than 35 hours per week.
•Involuntary part-time workers: people who
work 1 to 34 hours per week but who are looking
for full-time work.
When labor markets
weaken, an increasing
number of people have to
settle for part-time work.
Part-Time Employment as a Percent of Total Employment
17.5
1982
Recession
17.0
1990-91
Recession
16.5
2001
Recession
16.0
15.5
15.0
1972
1975
1978
1981
1984
1987
1990
1993
Year
Source: Bureau of Labor Statistics
1996
1999
2002
Involuntary Part-Time Workers
2400
2200
1990-91
Recession
1982
Recession
2000
2001
Recession
1800
1600
1400
1200
1000
1972
1976
1980
1984
1988
Year
Source: Bureau of Labor Statistics
1992
1996
2000
Average Weekly Hours, Civilian Labor Force
40.0
1990-91
Recession
39.5
1982
Recession
39.0
38.5
38.0
37.5
1977
1980
1983
1986
1989
Year
Source: Bureau of Labor Statistics
1992
1995
1998
2001
Sources of
Unemployment
•Job Losers: People who are fired or laid off from their jobs,
either permanently or temporarily.
•Job Leavers: People who voluntarily quit their jobs.
•Entrants: People who have just left school and entered the job
market are entrants.
•Reentrants: People who previously held jobs but, then quit and
left the labor force and have now decided to look for jobs.
Economists distinguish between
four types of unemployment:
Frictional
Seasonal
Structural
Cyclical
 This type of
unemployment is the
(unavoidable) product
of the movement of
human resources
between jobs, or into
the labor force.
I haven’t found a job
yet, so I’m frictionally
unemployed
I’m a “techie” who
is relocating to
Dallas because
my wife got
transferred
Unemployment arising
from the seasonal nature of
some economic activities.
Construction workers in
Minnesota unemployed in
February.
Employees of ski resorts
unemployed in July.
Structural
Unemployment
This is unemployment arising
from changes in the structure
of output or methods of
production.
Displacement of Delta farm
workers as a result of the
mechanization of agriculture.
Displacement of draftsmen due the
the movement to computer aided
design (CAD).
Displacement of auto workers due
to car assembly by computer-guided
robots.
Self Service
led to the demise
of the gas station
attendant
This is unemployment
due a general contraction
in the level of business
activity--that is, recession
related unemployment
Auto and farm equipment
workers laid off to to weak
sales.
Workers in heavy machinery
industries laid off because
investment spending is soft.
I couldn’t find work
in 1991, because
hardly anyone was
building a new home
Unemployment is a drag!
•Unemployment causes stress on individuals and
families.
•Unemployment is correlated with rising incidence
of spousal and child abuse, divorce, drug and
alcohol use, and crime.
•The purely economic cost of unemployment is lost
physical output, as measured by the GDP Gap
GDP Gap = Potential GDP - Actual GDP,
where potential GDP is the the level of output
the economy would achieve if the
unemployment rate were equal to the Natural
Rate of the NAIRU
NAIRU is an acronym for “non-accelerating
inflation rate of unemployment.” It is
the unemployment rate corresponding to zero
cyclical unemployment
NAIRU is the “full-employment”
unemployment rate.
Actual unemployment in
was 9.6%. If you assume
that the NAIRU was
6%, then we can use
Okun’s law to estimate
a GDP gap of $352
billion for 1983 (1987 dollars)
Okun’s law: each percentage
point difference between the
unemployment rate and the
NAIRU converts to a 2.5
percent GDP gap.
Unemployment and Real GDP