Chapter 6 - Medium Run The Labor Market(Blanchard ch 6 Prof...

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Medium Run: The Labor Market (Blanchard ch. 6) Prof. Irina A. Telyukova UCSD Econ 110A Spring 2008
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2 Outline We have learned about the goods and financial markets. We will now study the labor market – another crucial element of the economy. square6 Wage determination occurs in the labor market. square6 Price determination occurs when firms, major players in the labor market, decide how to price their product. square6 The interplay between wage and price detemination will help us determine the equilibrium rate of unemployment.
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3 I. Labor Market in the U.S., 2006 Noninstitutional population: 228.8 million square6 Civilian labor force: 151.4 million head2right Employment: 144.4 million head2right Unemployment: 7.0 million head2right Unemployment rate: 4.6% square6 Participation rate: 66.2 % square6 Out of labor force: 77.4 million head2right But want a job now: 4.8 million
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4 Labor Market in the U.S., 2006 Noninstitutional population: 228.8 million square6 Civilian labor force: 151.4 million head2right Employment: 144.4 million head2right Unemployment: 7.0 million square6 Participation rate: 66.2 % square6 Out of labor force: 77.4 million Men 110.6 m / Women 118.2 m 81.3 m / 70.2 m 77.5 m / 66.9 m 3.8 m / 3.2 m 73.5 % / 59.4 % 29.4 m / 48 m
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5 Labor Market: Healthy or Not? Can we tell from the unemployment rate whether or not the conditions in the labor market and the economy in general are good? square6 What if the unemployment rate is low? square6 …and labor force participation rate has recently fallen? square6 What if the unemployment rate is high? square6 …and people are stuck in unemployment for a long time? (Few separations , few hires barb2right stagnant unemployment pool) square6 …and people get in and out of unemployment quickly? (Many separations, many hires barb2right active labor market)
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6 U.S. Flows In and Out of Unemployment: Nov 2007 square6 4.5 million separations square6 2.45 million quits square6 1.8 million layoffs square6 4.0 million job openings square6 4.7 million hires square6 7.6 million unemployed square6 Average duration of unemployment: 17.5 weeks
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7 II. Unemployment Rate in Historical Perspective Source: BLS 2 3 4 5 6 7 8 9 10 11 12 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
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8 Unemployment Rate: Trend 2 3 4 5 6 7 8 9 10 11 12 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
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9 Unemployment Rate: Cycles 2 3 4 5 6 7 8 9 10 11 12 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 Recession Recession Recession Recession Recession ?
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