15.1 Employment and Unemployment Flashcards
What two characteristics of the labor force are common to most developed countries?
These two characteristics of the labour force—long-term growth in employment but short-term fluctuations in the unemployment rate—are common to most developed countries.
What is a historical comparison between the unemployment rate and the NAIRU?
The unemployment rate displays considerable short-run fluctuations; the NAIRU shows a slight downward long-run trend.
How can we compare labor force and unemployment over the long term and short term?
Over the span of many years, increases in the labour force are more or less matched by increases in employment.
Over the short term, however, the unemployment rate fluctuates considerably because changes in the labour force are not matched by changes in employment.
How much has employment changed since 1976
The amount of employment in Canada has increased dramatically over the past few decades. In 1976, there were approximately 9.7 million employed Canadians.
By January of 2020 (just before the onset of the COVID-19 pandemic), total employment was 19.2 million.
What is the actual amount of employment determined by?
The actual amount of employment, of course, is determined both by the demand for labour and by the supply of labour.
What has been the trend on the supply side of the labor force since the end of the Second World War?
On the supply side, the labour force has grown virtually every year since the end of the Second World War.
What are the three main causes of the increase in Canada’s labour force?
- A rising population, which boosts entry into the labour force of people born 15 to 25 years previously.
- Increased labour force participation by various groups, especially women; and net immigration of working-age persons.
What is the net increase in employment?
The net increase in employment is the difference between all the jobs that are created and all those that are lost.
Do most years see a net increase or decrease in employment?
In most years, enough new jobs are created both to offset the number of jobs that have been eliminated and also to provide jobs for the growing labour force. The result is a net increase in employment in most years.
What was employment in Canada in early 2020? What is the typical yearly increase in employment?
In early 2020, Canadian employment was 19.2 million workers.
In a typical year employment increases by about 1 percent, meaning an absolute increase of roughly 16 000 workers every month.
What happened to employment levels in 1980. What was it a result of?
Partly as a result of policy decisions to reduce inflation in several developed countries, worldwide unemployment rose to high levels in the early 1980s.
The unemployment rate remained high in many advanced industrial countries and only began to fall, and even then very slowly, during the latter half of the decade.
What were unemployment rates in Canada between 1983 and 1988?
From a high of more than 12 percent in 1983, the Canadian unemployment rate fell to 7.5 percent in 1988, a point that many economists at the time thought was close to the Canadian NAIRU
Describe unemployment rates in Canada between 1990 and 2000
With the onset of another recession in the early 1990s, the unemployment rate then rose through 1990 and 1991, reaching 11.3 percent by 1992.
During the next few years, the unemployment rate fell only slowly as the Canadian recovery was weak; by early 1994 the unemployment rate was still more than 10 percent. But the speed of the Canadian recovery quickened and unemployment began to drop.
By early 2000, after five years of steady economic recovery, the unemployment rate was 6.8 percent.
How was Canada’s unemployment rates effected by the 2008 crisis?
With the onset of the 2008 global financial crisis and the worldwide recession that immediately followed, unemployment again increased sharply.
The Canadian economy fared much better than others, however, and unemployment increased only to 8.7 percent at the depth of the recession in mid-2009 (whereas it was considerably higher in the United States and most of Europe).
After a decade of gradual economic recovery that brought Canadian real GDP close to its potential level by mid 2019, the unemployment rate was 5.8 percent.
Describe Canada’s unemployment rates during the Covid-19 pandemic.
The onset of the COVID-19 pandemic in March of 2020 led to a plunge in real GDP and a sharp increase in unemployment as Canadian governments required the shutdown of many parts of the economy.
The unemployment rate increased almost immediately—from 5.8 percent just before the pandemic to 13.7 percent in the pandemic’s first few months—as millions of Canadians stayed at home and many were unable to work.
Throughout 2020 and well into 2021, the unemployment rate declined as several parts of the economy re-opened. By the end of 2021 the unemployment rate was only slightly above the pre-pandemic level from late 2019.
How do periods of economic growth and periods of recession or slow growth effect unemployment rates?
During periods of rapid economic growth, the unemployment rate usually falls. During recessions or periods of slow growth, the unemployment rate usually rises.
In term’s of unemployment, what does the public and media tend to focus on? What can this focus often lead to?
The public’s and the media’s focus on the labour market, however, tends to be on the overall level of employment and unemployment rather than on the amount of job creation and job destruction.
This focus can often lead to the conclusion that few changes are occurring in the labour market when in fact the truth is quite the opposite.
What is the amount of activity in the labour markey better reflected by?
The amount of activity in the labour market is better reflected by the flows into and out of unemployment than by the overall unemployment rate.
What can we see by looking at gross flows in the labour market as opposed to net?
By looking at the gross flows in the labour market, we are able to see economic activity that is hidden when we look just at changes in the overall amount of employment and unemployment (which is determined by net flows).
Indeed, the gross flows are typically so large that they dwarf the net flows.
What is “The Stock of Unemployment”?
In most reports about changes in unemployment, both in Canada and abroad, emphasis is typically on the stock of unemployment—that is, on the number of people who are unemployed at a particular point in time.
What do the blue circles represent in a chart of Labor Market Flows?
The blue circles represent the number of individuals at the end of each month (the stocks) in each possible “state”—employment (E), unemployment (U), and not in the labour force (N).
What does the flow into unemployment represent?
This flow into unemployment represents
workers losing jobs through layoffs or plant closure
workers quitting jobs to search for different jobs
new entrants to the labour force searching for jobs
What do flows INTO unemployment represent?
The green line shows the monthly flow out of unemployment, corresponding to the sum of the flows in arrows ② and ④ in the first figure. This outflow represents
unemployed individuals finding new jobs
unemployed individuals becoming discouraged and leaving the labour force
What is the connection between the flows and the stocks in the labour market?
Whenever the flows into unemployment exceed the flows out of unemployment, the stock of unemployment rises.
Conversely, whenever the flows out of unemployment exceed the flows into unemployment, the stock of unemployment falls.
