Makes unemployment seem better than it is ○ Counts people being employed if they hold part-time jobs • Overstate the true extent of joblessness • Problems with Measuring the Unemployment Rate: Higher the labor force participation rate, the more labor that will be available and the higher a country's levels of GDP and GDP per capita • Older men retiring earlier and younger men remaining in school longer ○ Due to severity of 2007-2009 recession and weak recovery ○ Increased women rate caused by changing social attitude; federal legislation outlawing discrimination; increasing wages; typical family having fewer children; and increase in female household heads ○ Since 1948: falling labor force participation rate of adult men and rising labor force participation rate of women • Trends in Labor Force Participation: Chapter 9 Ebook: Unemployment and Inflation (275-290) Lesson 5 Page 28
increase in female household heads During Great Depression of 1930s some people were unemployed for years at a time. ○ Longer the person is unemployed the greater the hardship • 4 months to about 10 months during 2007-2009 recession ○ Modern US economy the typically unemployed person stays unemployed for a relatively brief time. • How Long are People Typically Unemployed: Samples 300,000 business establishments ○ Survey does not provide information on the number of self-employed persons because they are not on a company payroll. ▪ The survey may fail to count some persons employed at newly opened firms that are not included in the survey. ▪ Provides no information on unemployment ▪ Values for employment that the BLS initially announces ca be significantly revised as data from additional establishments become available. ▪ Provides information on the total number of persons who are employed and on a company payroll; 4 drawbacks ○ Establishment survey (payroll survey): measure total employment in the economy • The Establishment Survey: US in 2014: 29.1 million jobs created; 26.1 millions jobs destroyed. • The creation and destruction of jobs results from changes in consumer tastes, technological progress, and the successes ad failures of entrepreneurs in responding to the opportunities and challenges of shifting consumer tastes and technological. • Job Creation and Destruction over Time: Frictional unemployment 1. Structural unemployment 2. Cyclical unemployment 3. 9.2: Types of Unemployment: Frictional unemployment: short-term unemployment that arises from the process of matching workers with jobs. • Weather or fluctuations in demand for some products or services during different times of the year. ○ Some frictional unemployment is due to seasonal factors • Frictional Unemployment and Job Search: Unemployment that arises from a persistence mismatch between the skills or attributes of workers and the requirements of jobs • Structural Unemployment: Cyclical unemployment: unemployment caused by a business cycle recession. • Cyclical Unemployment: Natural rate unemployment: the normal rate of unemployment consisting of frictional unemployment and structural unemployment.