Intermediate Macroeconomics Ch6 notes

Intermediate Macroeconomics Ch6 notes - Chapter 6: The...

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The Labor Market Labor force = employed population + unemployed population. The population excludes those under the legal working age, in the armed force, prisoners, and those potentially available for civilian employment are called noninstitutional civilian population . The noninstitutional civilian population minus those out of the labor force who neither working nor searching for a job is called civilian labor force. Participation rate = labor force/noninstitutional civilian population. The unemployment rate = unemployed population/labor force. Unemployment is a dynamic concept, it is the net between those who entering and exiting unemployment in a given period of time. The inflow and outflow of unemployment are large relative to the number of unemployed. For most of the unemployed, it is a quick transition to another job than a long wait for position. Workers enter the unemployment pool due to “ quits ” and “ layoffs ”. Quits refers to the voluntary action of job switching, while layoffs is caused by downsizing of firms. Duration of unemployment is the average length of time people are unemployed. Apart from the inflow and outflow of unemployment, the flows in and out of the labor force are also enormous. Those entering the labor force are new graduates and the retired people will leave the labor force. Sometimes those who have left the labor force may want to return to work, although they are not actively searching for a job. This “out of the labor force” is called discouraged workers . Given the problem of discouraged workers, a ratio called nonemployment rate , which is (population – employment)/population is discussed as the unemployment rate is biased if discouraged workers are serious in the economy. Movement in Unemployment Similar to business cycle, unemployment rate can have an upward or downward trend. Year-to-year movements in the unemployment rate are closely associated with recessions and expansions (or business cycles). Given poor economic performance, if firms choose to hire fewer workers rather than layoff workers, then the unemployed would find it harder to get jobs. Given poor economic performance, if firms choose to layoff workers to cut
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Intermediate Macroeconomics Ch6 notes - Chapter 6: The...

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