KW_Macro_Ch_07_Sec_03_The_Unemployment_Rate

KW_Macro_Ch_07_Sec_03_The_Unemployment_Rate - chapter 7...

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>> Tracking the Macroeconomy Section 3: The Unemployment Rate chapter 7 In addition to measures of GDP, a number of other measures help us track the per- formance of the economy. As we learned in Chapter 6, one extremely important sta- tistic for economic policy is the unemployment rate because unemployment leads to lost output and lower social welfare. Cases of very high unemployment, such as in a depression, often lead to political unrest. What exactly does the unemployment rate tell us about the economy? Understanding the Unemployment Rate Every month, the U.S. Census Bureau carries out the Current Population Survey, which involves interviewing a random sample of 60,000 American families. People are asked whether they are currently employed. If they are not employed, they are asked whether they have been looking for a job during the past four weeks. As you may recall from Chapter 6, the labor force is equal to the total of those who are either working or have recently been seeking employment; it does not include discouraged
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workers, those who have given up actively looking for a job. Those who are actively looking for work but have not, or at least not yet, found a job are classified as unem- ployed. The unemployment rate, which we showed how to calculate in Chapter 6, is the percent of the labor force that is unemployed. What does the unemployment rate tell us? It indicates how easy or difficult it is to find a job given the current state of the economy. When the unemployment rate is low, nearly everyone who wants a job can find one. When the unemployment rate is high, jobs are hard to find. As an illustration, recall the story that we told at the beginning of Chapter 6: in the spring of 2000, when the U.S. unemployment rate was only about 4%, potential employers were anxiously wooing potential employees. Two years later, when the unemployment rate had risen to 6%, new graduates found their job search much more difficult. Although the unemployment rate is a good indicator of current conditions in the job market, it should not be taken literally as a measure of the percentage of people who want to work but can’t find jobs. In some ways the unemployment rate exagger- ates the difficulty people have in finding work. In other ways, the opposite is true: low
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KW_Macro_Ch_07_Sec_03_The_Unemployment_Rate - chapter 7...

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