Unemployment

Question 1

What does it take to counted as unemployed?

Answer 1

•	Not working but are seeking work
o	16 and over
o	Not institutionalized
o	Not in the military
o	Not chosen to opt out of workforce

Question 2

How do we define the unemployment rate?

Answer 2

• (# of unemployed/ #in the labor force) times 100
• Structural, frictional, and cyclical unemp
• Discouraged workers and hidden unemployment
• Unemployment composition and duration

Question 3

What is hidden unemployment, discouraged workers?

Answer 3

• Hidden unemployment
(not counted as unemp)
o Working in an industry that does not utilize their skill
o Have not given up looking for another job while employed
• Discouraged workers
o Not seeking employment (4 weeks)
o Does not find employment after long term unemployment

Question 4

What are the three cause or types of unemployment?

Answer 4

• Frictional unemp
(Unemployment due to the natural frictions of the economy represented by qualified individuals with transferable skills who change jobs)
o Job search services, ect.
• College student who seeks work who has edu or skills for job
• Short term contract engineer (when contract ends seeks new job)
o Shorter duration
• Structural unemp
(Unemployment due to the structural changes in the economy that eliminates some jobs and create others for which the unemployed are unqualified)
o Training, education, ect.
• 90’s lost blue collar jobs (factory) gained white collar jobs (computer science, finance) had to back to school for training/edu
• Older workers not interested in going back to school
o Longer term issue then frictional
• Cyclical unemp
(Unemployment due to contractions in the economy)
o Stabilization (monetary/fiscal) policies
• Economy does well lots of jobs and unemp is down
• Economy does poorly fewer jobs and unemp is up
o Difficult to tell when jobs will come back

Question 5

What is Okun’s law?

Answer 5

• Change in unemp rate =-1/2(Actual GDP growth- 3%)
o Unemp rate moves opposite change in GDP
o To keep unemp rate from increasing actual GDP must grow at 3% per year
o To lower unemp by 1% must grow by 5%( 2% more the growth rate of GDP)
• Need to absorb constant increasing labor force

Question 6

Define the natural rate of unemployment (NAIRU). Why does it matter?

Answer 6

• NAIRU
(Non-Accelerating Inflation Rate of Unemployment)
o Specific level of unemp that exists in an economy that does not cause inflation to increase
• Natural rat of unemployment
o ‘full employment’ unemp rate there is structural and frictional but not cyclical
o Rate at which inflation =0
• Matters
o Full emp and no inflation

Question 7

What does JOLTS show?

Answer 7

Look Up