Chapter 15 Flashcards
What affects U-rate (unemployment rate)
When someone loses their job- the Urate goes up
when someone loses their job and gets another one, u-rate is unchanged
when someone gives up looking for a job U-rate goes down because they are no longer in the labor force.
Even though U-rate is pretty reliable, these are the reasons why it would be not
It excludes discouraged workers.
It does not distinguish between full-time and
part-time work, or people working part time because full-time jobs not available.
Some people misreport their work status in the BLS survey
The Duration of Unemployment
Most spells of unemployment are short:
Typically 1/3 of the unemployed
have been unemployed under 5 weeks,
2/3 have been unemployed under 14 weeks.
Only 20% have been unemployed over 6 months.
Yet, most observed unemployment is long term.
The small group of long-term unemployed persons has fairly little turnover, so it accounts for most of the unemployment observed over time.
Knowing these facts helps policymakers design better policies to help the unemployed.
Labor Force Statistics
Produced by Bureau of Labor Statistics (BLS),
in the U.S. Dept. of Labor
Based on regular survey of 60,000 households
Based on “adult population” (16 yrs or older)
Alternative measures of Labor utilization
U-1, persons unemployed 15 weeks or longer, as a percent of the civilian labor force;
U-2, job losers and persons who completed temporary jobs, as a percent of the civilian labor force;
U-3, total unemployed, as a percent of the civilian labor force (this is the definition used for the official unemployment rate);
U-4, total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers; 1000* ( {Unemployed +discouraged } / {labor force + Discouraged})
U-5, total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers; and
U-6, total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.
labor force participation rate
100* labor force/ adult population
Unemployment rate
(number of unemplooyed / labor force) * 100
Labor Force
Number of employed + number of unemployed
Discouraged workers :(
non-working people who are capable of working but have given up looking for a job given the state of the job market.
no longer considered a part of the work force by the BLS but in some unemployment formulas they will be added on
Structurally unemployed
the skills gap
Or when someone who has a skill set and there isn’t enough demand for that
caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers
Frictionally unemployed
caused by people in the process of moving from one job to the other
or sectoral shifts in the economy where if cotton price goes down, the demand for labor in cotton will decrease and the textile labor industry will increase demand of labor
cyclically unemployed
(the deviation of unemployment from its natural rate)
happens when overall demand for goods and services in an economy cannot support full employment. happens in periods of slow economic growth or periods of economic contraction (beginning recession)
Economic contraction or beginning recession
happpens after the business cycle peaks but before it becomes a trough ( the big dip) part of the business cycle of recession recovery expansion.
Natural Rate of unemployment
The normal rate of unemployment around which the unemployment rate fluctuates
does not have cyclical rate in it because the cyclical rate is the result of the natural rate varying
what does it mean if a minimum wage is “binding”
if a minimum wage is set above the market equilibrium wage, however, the market cannot reach equilibrium; thus the minimum wage is considered binding.
