CH 8.1

CH 8.1 - M acroeconomics

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Macroeconomics As our opening story indicates, a high unemployment rate was a very important issue in the 1992  election—and understandably so.  Figure       8.1     shows the U.S. unemployment rate from 1948 to  2008; as you can see, the labor market hit a difficult patch in the early 1990s, with the unemployment  rate rising from 5.2% in July 1990 to 7.8% in July 1992, before beginning a gradual decline. What did  the rise in the unemployment rate mean and why was it such a big factor in people’s lives? To  understand why policy makers pay so much attention to employment and unemployment, we need to  understand how they are both defined and measured. Figure       8.1        The U.S. Unemployment Rate, 1948–2008 The unemployment rate has fluctuated widely over time. It always rises during recessions, which are shown by the  shaded bars. It usually, but not always, falls during periods of economic expansion. It’s easy to define employment: you’re employed if and only if you have a job.  Employment  is the  total number of people currently employed, either full time or part time. Employment is the number of people currently employed in the economy, either full time or part time. Unemployment is the number of people who are actively looking for work but aren’t currently employed. Unemployment, however, is a more subtle concept. Just because a person isn’t working doesn’t  mean that we consider that person unemployed. For example, as of July 2007 there were 31 million  retired workers in the United States receiving Social Security checks. Most of them were probably  happy that they were no longer working, so we wouldn’t consider someone who has settled into a  comfortable, well-earned retirement to be unemployed. There were also 7 million disabled  U.S. workers receiving benefits because they were unable to work. Again, although they weren’t  working, we wouldn’t normally consider them to be unemployed.
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The U.S. Census Bureau, the federal agency tasked with collecting data on  unemployment, considers the unemployed to be those who are “jobless,looking for jobs, and  available for work.” Retired people don’t count because they aren’t looking for jobs; the disabled don’t  count because they aren’t available for work. More specifically, an individual is considered  unemployed if he or she doesn’t currently have a job and has been actively seeking a job during the  past four weeks. So  unemployment  is defined to be the total number of people who are actively  looking for work but aren’t currently employed. A country’s 
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CH 8.1 - M acroeconomics

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