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Chap_7_8_-_Unemployment_and_Potential_GDP[1] - Unemployment...

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Unemployment, the Labor Market, and Potential GDP People who are employed are people who have been paid to work at least one hour in the previous week or who are on vacation from their job. People who are unemployed , are people who are actively looking for work, but haven’t found a job. The labor force is everyone who is either employed or unemployed. Two statistics that are commonly calculated to get a sense of how things are going in the labor market are the unemployment rate and the labor force participation rate . The unemployment rate is normally a good indicator of what conditions are like in the job market, a low unemployment rate indicates that jobs are relatively easy to find, while a high unemployment rate indicates that jobs are relatively hard to find. The above graph shows the monthly unemployment rate over time from January 1948 until June 2009. While the average unemployment rate was 5.6%, there are large variations about the mean. The lowest unemployment rate since World War II was 2.5% in May and June of 1953, which is less than half of the average. The highest unemployment rate was 10.8% in November and December of 1982, which is almost twice the average. In June of this year, the unemployment rate was 9.5%, one of the highest rates since World War II. We calculate the unemployment rate as follows: unemployment rate = # of unemployed workers # of unemployed workers + # of employed workers × 100 There were 140 million employed people in the US in and 14.7 million unemployed people in June. Therefore the unemployment rate was: 0 2 4 6 8 10 12 Jan-48 Nov-54 Sep-61 Aug-68 Jun-75 Apr-82 Feb-89 Dec-95 Oct-02 Aug-09 Unemployment Rate (Percent) Year and Month Unemployment Rate
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K. Kramer © 2009 2 unemployment rate = 14.7 million 14.7 million + 140 million × 100 9.5% We can also calculate the unemployment rate for different subpopulations in the labor force, which is useful since the unemployment rate varies greatly between certain subpopulations. For example, in Table 1 we can see that the unemployment rate for adult men is 10%, while the unemployment rate for teenagers is more than double that at 24%. We can also see that the unemployment rate for African Americans, 14.7%, is much higher than that for whites at 8.7%. Being aware of these variations in the unemployment rate can help us understand who is being hurt most by unemployment. The labor force participation rate is an indicator of the willingness of people of working age to take jobs. It is defined as the percentage of the working age population who are members of the labor force: Labor force participation rate = Labor force Workingage population × 100 In June of this year the working age population was 234.9 million and the labor force was (14.7+140) = 154.7 million. Therefore the labor force participation rate was: Labor force participation rate = 154.7 million 234.9 million × 100 65.9% While these two statistics can be very helpful in giving you a sense of what is going on in the labor market, they don’t capture everything. For example, lets say you have a collage
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