MediumRun - Economy in the Medium Run[ECON 332 Vipul Bhatt...

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Economy in the Medium Run [ECON 332] Vipul Bhatt Department of Economics James Madison University 1 / 30 Medium Run View of the Economy In the short run prices are assumed to be “sticky” Over time prices (goods and inputs) will change over time as the economy transitions from short run to long run Labor is a key input in production and price of labor feeds into other prices in the economy In this topic we will focus on the feedback between the labor market and rest of the economy 2 / 30 Notes Notes
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Data for US Labor Market The Current Population Survey is the main source of the statistics on labor force, employment, participations, and earnings in the United States. Based on about 60,000 households interviewed every month. Some definitions: 1 Unemployed : A person who is currently unemployed but is actively looking for a job 2 Labor force is a measure of a country’s working population: Labfor Force = Unemployeds + Employeds 3 Unemployment rate is denoted by u : u = Unemployeds Labor Force 100 3 / 30 Labor Market: Facts (as of May 2016) z Working Age population (253 Million) Labor Force (158 Million) Not in Labor Force (94 Million) Employed (151 Million) Unemployed (7 Million) Not Available for Work (88 Million) Available for Work but not presently working (6 Million) Discouraged (0.5 Million) Not Available for Other reasons (5.5 Million) 4 / 30 Notes Notes
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Labor Market Flows Four types of possible flows: 1 Between jobs 2 Between Employment and Unemployment 3 Between Unemployment and Out-of-labor force 4 Between Employment and Out-pf-labor force When unemployment is high, workers are worse o ff in two ways: 1 Employed workers face a higher probability of losing their job 2 Unemployed workers face a lower probability of finding a job 5 / 30 Labor Market Flows 6 / 30 Notes Notes
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Labor Market Flows contd..
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