Lecture macroeconomics chapter 2 4 unemployment

Institute of International Education 2 4 Unemployment ▪ Unemployment is considered as an indicator of economic well being ▪ When a country keeps its workers as fully employed as possible, it achieves[.]

2.4 Unemployment

▪ Unemployment is considered as an indicator of economic well-being

▪ When a country keeps its workers as fully

employed as possible, it achieves a higher level

of GDP than it would if it left many of its workers idle

Population breakdown

Population

In working-age

Labor force

Employment Unemployment

Out of labor force

Out of working-age

Labor Force Statistics

▪ Employed: paid employees, self-employed, and unpaid workers in a family business

▪ Unemployed: who are without work but

available for and seeking employment

▪ Not in the labor force: everyone else, such as children, students, retirees…

The labor force is the total number of workers,

including the employed and unemployed

Labor Force Statistics

labor force participation rate

labor force adult population

= 100 x

Labor force participation rate:

% of the adult population that is in the labor force

Unemployment rate (“u-rate”):

% of the labor force that is unemployed

u-rate No of unemployed

labor force

= 100 x

Cyclical Unemployment vs the Natural Rate

Natural rate of unemployment

▪ is the rate of unemployment that the economy

experiences even during normal times

- Frictional unemployment: occurs when workers spend

time searching for the jobs that best suit their skills and tastes

- Structural unemployment: results because the number of jobs available in some labor markets is insufficient to provide

Cyclical Unemployment vs the Natural Rate

Cyclical unemployment

▪ the deviation of actual unemployment from its

natural rate

▪ refers to the additional unemployment that

occurs during recessions

Calculate labor force statistics

Compute the labor force, u-rate, adult population, and labor force participation rate

using this data:

# of employed 145.9 million

# of unemployed 8.5 million not in labor force 79.2 million