Unit 5: Full Employment In the long run, the right answer to unemployment is to create more jobs. - George Walker Bush, Unemployment is of vital importance, particularly to the unemployed. - Edward Heath Business will be either better or worse. When more and more people are thrown out of jobs, unemployment tends to rise. - Calvin Coolidge Society's Goals for Macro System Growth Stable Prices & Money Full Employment Stability of Business Cycle Key Measures: Unemployment Rate Labor Force Participation Rate Employment-Population Rate Net New Jobs Create New Unemployment Claims Jobs-workers ratio Unemployment in the U.S. US Unemployment Data - BLS.gov Analyzing employment Population Institutional Pop. Children (<16) Active Duty Military Not In Labor Force Adult NonInstitutional Civilian Pop. [A] Retired Don't want employment now In School Discouraged - quit looking for work Employed [C] Labor Force [B] (willing & able to work) Unemployed [D] (Not Employed, But Actively Looking) Voluntary Quit Involuntary Quit Returning New Entrant Defining “Adult Civilian NonInstitutionalized Population” = labor force + not-in-labor-force = total population – institutionalized – active duty military – children under age 16 Defining “Employed”: person is working regardless of type or num of hours/jobs. Defining “Unemployed”: no job, but willing, able, and actively looking for work. Defining Labor force: unemployed + employed Defining “Not-in-labor force: retired, stay-at-home spouses, idle rich, non-working students, discouraged wouldbe workers (not looking) Unemployment Rate: = Unemployed / Labor Force Excludes discouraged workers Labor Force Participation Rate: = Labor Force / Civ.N-I Adult Pop. = (employed + unemployed) / CivNIA Pop Employment Population Ratio = employed / population Why don’t the unemployed have a job right now? 4 Types of Unemployment: Frictional: open job exists for each unemployed worker but they haven’t matched up yet Structural: open jobs exist but require skills/locations that match workers’ Seasonal: temporary situation because job only exists during certain months of year. Cyclical: more unemployed workers than available open jobs. Policy Goal: ‘full employment’, but that doesn’t mean 0% rate. NATURAL RATE OF UNEMPLOYMENT: economy at capacity with zero frictional unemployment. Full Employment is usually defined as achieving the “natural rate” or zero cyclical.