202-T&C-3(1) - Econ 202 Terms and Concepts 3 LABOR...

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Econ 202: Terms and Concepts 3: LABOR UNEMPLOYMENT and CAPACITY UTILIZATION Employment rises and falls together with output and prices over the course of the business cycle, but there are dynamics within the labor market during the cycle that are not captured by the headline unemployment figures. Not everyone who is of working age and without a job is counted as unemployed. Definitions and Measures of Labor Unemployment: To be counted as employed or unemployed, a person must first be counted as a member of the Civilian Labor Force . 16 years of age or older Currently holding or seeking a full or part time job Not in the Armed Forces Not Institutionalized To be counted among the Unemployed, a person must: Be counted in the Civilian Labor Force Previously employed and reporting to the State Employment Office every two weeks Actively seeking work and registered with the State Employment Office. If the State does not know that you are looking for work, you are simply dropped from the Civilian Labor Force and not counted as unemployed. Two important rates are measured monthly from the Civilian Labor Force: Labor Force Participation Rate = Civilian Labor Force ÷ Population Unemployment Rate = Number of Unemployed Persons ÷ Civilian Labor Force From 1999 to 2009 the civilian labor force ranged from 138-155 million out of a population ranging from 279 to 307 million. In 2010, the labor force participation rate averaged 64.7%. In February 2012, the unemployment rate nationally was 8.3%, down from 10% nationally at the end of 2009 when the recent recession was at its deepest. This unemployment rate is called U3 – it is the official unemployment rate and it is a narrow measurement. It is the sum of: U1 – people who have been out of work 15 weeks or more U2 – people who are newly unemployed or whose temporary jobs came to an end It is not important for you to remember the numbers assigned to different measures, but it is important for you to understand the principle behind some of the measures. Under U3, if you have a part-time job you are considered employed, and if you are not showing up at the State Employment Agency to report your unemployment, you are out of the civilian labor force. If a recession lasts a long time, some people are in and out of work, or they give up looking for work altogether because they can’t find a job. If they’ve given up looking for work they are called discouraged workers , and they are counted in U4. If they have been employed any time in the 1
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