BU204_Krugman_Chapter 15

BU204_Krugman_Chapter 15 - chapter 1 5 What you will learn...

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368 chapter 15 >> Labor Markets, Unemployment, and Inflation ICHAEL WATSON, A SOFTWARE developer in Colorado Springs, has been moving in and out of unemployment for three years. Ever since his high-tech employer closed its doors in July 2002, Watson has been without a per- manent job and traveling to places as far- flung as Virginia and Djibouti to do temporary contract work. He isn’t alone: Colorado Springs, home to many high-tech workers, lost nearly 20% of its high-tech jobs between 2000 and 2004. Some work- ers who lost their jobs have since found new ones in Colorado Springs, others have left the area, and others—like Watson—are still looking for permanent work. The economy in North Carolina, where textile engineer Tommy Patterson lives, is booming relative to that in the rest of the country. But Patterson, who lost his job at a Charlotte textile mill in November 2004, is still looking for work as a process engineer in the chemical industry. Still, despite TWO PATHS TO UNEMPLOYMENT M Job loss strikes many kinds of workers, from computer programmers like Michael Watson to process engineers like Tommy Patterson. These two, like the millions of other workers who lose jobs in any given year, would like to see themselves as pictured above: employed again. Samuel Ashfield/Taxi/Getty Images IT Stock/AgeFotostock sending out between 50 and 75 résumés, he has had few bites to date. In North Car- olina there are more jobs than there were a few years ago, but manufacturing and engi- neering jobs are still hard to come by. Because both Watson and Patterson are currently jobless and actively seeking em- ployment, they are considered to be unem- ployed. Both are in professions on the decline or stagnating in their given loca- tions, but each is hesitant to move his fam- ily to a new city in search of work. So both men continue to search actively for perma- nent employment that’s a good match for their skills and ambitions. At any given point in time, millions of Americans are actively pursuing employment but have not found the right match. Others have recently been laid off, and still others have just entered the workforce but haven’t yet found jobs. This “natural” churning of the labor force means that at any given point in time some fraction of the population is What you will learn in this chapter: The meaning of the natural rate of unemployment, and why it isn’t zero Why cyclical unemployment changes over the business cycle How factors such as minimum wages and efficiency wages can lead to structural unemployment The reasons that the unemploy- ment rate can be higher or lower than the natural rate for ex- tended periods The existence of a short-run trade-off between unemployment and inflation, called the short- run Phillips curve, that disap- pears in the long run Why the NAIRU, the nonacceler- ating inflation rate of unem- ployment, is an important measure for policy-making
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The Nature of Unemployment U.S. government statistics count as unemployed a worker who is actively looking for a job but hasn’t found one. Recall from Chapter 6 that the unemployment rate is the ratio of
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This note was uploaded on 05/18/2010 for the course BU204 MACROECONO taught by Professor Joseruiz during the Spring '09 term at Kaplan University.

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BU204_Krugman_Chapter 15 - chapter 1 5 What you will learn...

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