Employment and
Unemployment
Civilian labor force
Total Population age 16 and over
Employed
Employees
Self-employed
Unemployed
New entrants
Re-entrants
Lost last job
Quit last job
Laid off
Not in Labor Force
Armed forces
Household workers
Students
Retirees
Disabled persons
Institutionalized
Discouraged workers
UNEMPLOYMENT
Measurement of Unemployment, Jan 2005
Labor force
participation
rate
65.8%
Total
Population
Jan 2005 estimate
295,412,000
Under 16
and/or
institutionalized
Not in
labor
force
76,858,000
140,241,000
Employed
Unemployment
Rate
5.2%
70,575,000
Unemployed
Civilian Labor
force
147,979,000
7,737,000
Unemployment Rate =
Unemployed
X 100
Labor Force
7,737,000
X100 = 5.2%
147,979,000
If the total population is 280 million, and the civilian
labor force includes 129,558,000 with jobs &
6,739,000 unemployed but looking for jobs, then the
4.9___%.
unemployment rate would be
6,739,000 / 136,297,000 x 100 = 4.9%
Persons Not in the Labor Force
1.8 million persons who were marginally attached to the
labor force in January, about unchanged from a year earlier.
• These individuals wanted and were available to work and
had looked for a job sometime in the prior 12 months.
• They were not counted as unemployed—they did not
actively search for work in the 4 weeks preceding the survey.
Discouraged workers, a subset of the marginally attached,
were not currently looking for work specifically because they
believed no jobs were available for them.
• The number of discouraged workers, at 515,000 in
January, was slightly higher than a year earlier.
The other 1.3 million marginally attached had not searched
for work for reasons such as school or family responsibilities.
Three Types of Unemployment
Frictional – “temporary”, “transitional”, “short-term.”
(“between jobs” or “search” unemployment)
Examples:
1. People who get “fired” or “quit” to look for a better
one.
2. “Graduates” from high school or college who are
looking for a job.
3. “Seasonal” or weather-dependent jobs such as:
“agricultural”, “construction”, “retail”, or “tourism.”
[lifeguards, resort workers, & migrant workers.]
Frictional unemployment signals that “new jobs” are
available and reflects “freedom of choice”.
These are qualified workers “transferable” skills.
Three Types of Unemployment
Structural – “technological” or “long term”. basic changes in the
“structure” of the labor force which make certain “skills obsolete”.
√ Automation may result in job losses. Consumer taste
may make a good “obsolete”.
• The auto reduced the need for carriage makers.
• Farm machinery reduced the need for farm laborers.
√ “Creative destruction” means as jobs are created, other
jobs are lost. Jobs of the future destroy jobs of today.
“These jobs do not come back.”
“Non-transferable skills”
– choice is prolonged unemployment or retraining.
Frictional and Structural make up the
“natural rate of unemployment”.
Three Types of Unemployment
Cyclical – “economic downturns” in the business
cycle.
√ Cyclical fluctuations” caused by deficient demand
for goods and services
√ “Durable goods” jobs are impacted the most.
• Purchase of these durables can be postponed
because they can be repaired.
“Cyclical unemployment” is “real unemployment”.
“These jobs do come back.”
Survey on Unemployment
BLS calls 60,000 households every month.
They ask three questions:
1. Are you working? If the answer is no,
2. Did you work at all this month-even 1 day?
You are a member of the LF if “yes” on 1 or 2.
3. Did you look for work during the last month?
[agency, resume, interview]
A “yes” counts you as
part of the LF.
A “no” means you are not counted. You are a
“discouraged worker.” The labor force consists of the
employed and unemployed.
Full Employment
Full employment is less than 100% because the
economy is dynamic—frictional and structural
unemployment are often inevitable.
The Full employment rate of unemployment or the
Natural Rate of Unemployment (NRU) is present
when the economy is producing its potential output.
NRU is present when the number of job seekers
equals the number of job vacancies.
When labor markets are in balance, there is
lag time. Workers seeking jobs and those
retraining are the cause of the lag.
The Natural Rate of Unemployment exists when
the cyclical unemployment is zero.
The NRU is not static; the economy will want to move to
its potential output and cyclical unemployment can
interfere. When labor markets are tight, firms quickly
retrain structurally unemployed and workers who
previously were not in the labor force come back, the
economy can operate below the NRU.
Economists in the 1980’s thought the NRU was 6%. Today, the
figure is 4 to 5%. Why?
√ Fewer workers available as baby boomers age.
√ Workers find jobs more quickly—the internet is a source of
information.
√ Changes in the welfare system put more people in the labor
force.
√ Doubling of US prison population removes relatively high
unemployment individuals from the labor force.
Natural & Actual Unemployment Rates
Europe’s Natural Unemployment
Rate is 8%-11%
1. Labor unions are stronger
2. There are more restrictions on firing workers
which makes employers reluctant to hire them in
the 1st place.
3. Much more generous unemployment insurance
4. Sweden-(free college); unemployment for 2
years with 95% pay; and maternity leave is for
two years.
Another Look at the Natural Rate
Hottest Jobs
5 Jobs for the Money
1.Physician/surgeon
($156,000/$200,000)
2. Airline pilot
5 Jobs for Independence
1. Computer engineer
2. System analyst
3. Psychologist
($95,794)
4. Clinical social worker
3. Computer engineer
5. Marketing, advertising,
($70,000)
public relations manager
4.Management consultant
($60,000)
“Econ, Econ”
5. Lawyer($58,000)
6. Teaching - oh!!
JOB FACTOID!
In 1960, 60% of jobs could
be held by unskilled or
semi-skilled workers.
Today, it is only 15%.
Hottest Jobs
These jobs will have the most net gains through 2012 (in 1000’s)
1. Teachers K-12
724,000
2. Registered Nurses
623,000
3. Post secondary teachers
603,000
4. Customer service reps
458,000
5. Computer support
420,000
6. General Operations Manager
376,000
7. Sales reps
356,000
8. Truck drivers
337,000
9. Software engineers
307,000
10. Accountants and auditors
205,000
Bureau of Labor Statistics
Top Paying College Majors for 2004
1. Computer Engineering
2. Chemical Engineering
3. Electrical/Electronics Engineer
4. Computer Science
5. Mechanical Engineering
6. Mgmt Info Sys/Bus. Data Processing
7. Economics/Finance
8. Civil Engineering
9. Accounting
10. Management Info Sys
11. Teaching
12. Nursing
13. Marketing/Marketing Mgmt.
14. Business Admin/Mgmt
15. Communications
16. Psychology
$52,169
$52,038
$50,566
$50,543
$49,400
$42,543
$42,150
$41,067
$42,360
$40,000
$40,600
$37,803
$36,674
$36,515
$28,000
$27,000
Fastest Growing Fields
These jobs will add the
largest percentage of positions through 2012
1. Network Systems and Communication Analysts
57%
2. Physician Assistants
48.9%
3. Software Engineers
45.5%
4. Physical Therapist Assistants
44.6%
5. Fitness Trainers
44.5%
6. Database Administrators
44.2%
7. Dental Hygienists
43.1%
8. Hazardous material removal workers
43.1%
9. Computer Systems analysts
39.4%
10. Environmental Engineers
38.2%
The FEDS Pay Well Many US Government jobs pay a
higher average salary than what the private sector pays.
(in thousands of
dollars)
FED
Gov’t
pays
1 Astronomer
$104
2 Financial Managers
94
3 Economist
84
4 Chemist
80
5 Electrical Engineer
76
6 Public Affairs
70
7 Librarian
67
8 Land Surveyor
63
9 Nurse
61
10 Secretary
37
Private
Sector
pays
$86
84
63
57
74
51
54
59
52
31
GLOBAL PERSPECTIVE
Unemployment Rates 5 Industrial Nations
1992 - 2002
Economic Growth
The Business
Cycle
Unemployment
15
France
Inflation
CPI
Redistributive
Effects of
Inflation
U.K. Germany
10
Anticipated
Inflation
Effects of
Inflation on
Output
U.S.
Japan
5
Key Terms
0
1992
8 - 23
1997
2002
Source: Economic Report of the President, 2003