Unemployment2011A

Unemployment2011A - Econ145.Unemployment2011A John Pencavel...

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1 The first survey reporting unemployment in this way was for April 1940 and it was devised by the Works Progress Administration. See David Card, “Origins of the Unemployment Rate: The Lasting Legacy of Measurement without Theory”, AER , 101(3), May 2011, 552-57 Econ145.Unemployment2011A John Pencavel UNEMPLOYMENT The monthly CPS defines someone as unemployed if, during the survey reference week (usually the week that includes the 12 th of the month), he or she is not employed for pay or profit, if the individual has looked actively for work during the past four weeks, and is available for work (except for temporary illness). 1 The individual may or may not be receiving unemployment benefits. Actively looking for work includes contacting an employer or having a job interview; contacting an employment agency or friends and relatives; sending out resumes or filling out applications; placing or answering advertisements; or checking registers of job openings. Workers expecting to be recalled from temporary layoff are counted as unemployed regardless of whether they undertook job search. The unemployment rate (number unemployed ÷ number in the labor force usually reported as a percent) moves cyclically “Recession” = period from a peak to a trough, i.e., synonym for “Contraction” “Expansion” = period from a trough to a peak
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2 National Unemployment Rate for those aged $ 16 years in Percent, Annual, from 1948 to 1975 over these years, the recessionary periods are specified below beginning to end: month/year months since previous recession duration in months unemployment peak in % % GDPdecline, peak to trough 11/48-10/49 37 11 7.9 1.7 7/53-5/54 45 10 6.1 2.6 8/57-4/58 39 8 7.5 3.1 4/60-2/61 24 10 7.1 1.6 12/69-11/70 106 11 6.1 0.6 11/73-3/75 36 16 9.0 3.2 For instance, 11/48-10/49 means the peak occurred in November 1948 and the trough in October 1949
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3 National Unemployment Rate for those aged $ 16 years in Percent, Annual, from 1976 to 2011 The figure for 2011 above is not the average for the year but just for April 2011. Over these years, the recessionary periods are specified below. beginning to end: month/year months since previous recession duration in months unemployment peak in % % GDPdecline, peak to trough 1/80-7/80 58 6 7.8 2.2 7/81-11/82 12 16 10.8 2.7 7/90-3/91 92 8 7.8 1.4 3/01-11/01 120 8 6.3 0.3 12/07-6/09 73 18 10.6 4.1
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4 Define U = numbers unemployed at a given moment D = average duration of unemployment S = numbers entering the pool of unemployment D and S are flows over a period of time; U is a stock at a given moment. A basic stock-flow relationship states that, when unemployment is neither rising nor falling, S . D = U When unemployment is rising, S . D > U ; when unemployment is falling, S . D < U . Consider this example in which at the beginning of each month, 50 workers enter the state of unemployment so S = 50. They remain there for 3 months so, for all workers, D = 3 months. Hence, in any month, the total number of unemployed is 50 . 3 = 150 workers.
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5 S L D U L . month enter unemployment size of unemployment pool at end of month Jan Feb Mar Apr May Jun Jul Aug Sep Oct J a n 5 05 0 0 0 0 0 0 0 0 F e b 5 0 0 0 0 0 0 0 M a r 5 0 5 0 5 0 0 0000 Apr 50 50 50 0 0 0 0 May 50 50 50 0 0 0 Jun 50 50 50 0 0 Jul 50 50 50 0 Aug 50 50 50 Sept
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This note was uploaded on 01/16/2012 for the course ECON 145 at Stanford.

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Unemployment2011A - Econ145.Unemployment2011A John Pencavel...

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