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15:Employment and Unemployment. What are the unemployment rate, the labor force participation rate, and other labor market measures? What are the sources and duration of unemployment? What is full employment? How are employment and wage rates determined by supply and demand?. Vital Signs. - PowerPoint PPT Presentation
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15:Employment and Unemployment
What are the unemployment rate, the labor force participation rate, and other labor market measures?
What are the sources and duration of unemployment?
What is full employment? How are employment and wage rates
determined by supply and demand?
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Vital Signs
The monthly unemployment report is treated as a critical measure of the health of the economy.
To understand the importance of the unemployment rate, we need to know how it is measured and whether it is reliable.
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Employment and WagesWhy do we care??
Real GDP depends on: the quantities of labor and capital
employed entrepreneurship the state of technology
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Population Survey
Every month, the U.S. Census Bureau conducts the Current Population Survey.
This survey covers 60,000 households and is used to estimate: the size of the working age population the number of people employed the number of people unemployed
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Population Categories
The working-age population is the total number of people 16 years and older who are not in jail, hospital, or some other form of institutional care.
The working-age population is divided into two groups: those in the labor force and those not in the labor force.
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The Labor Force
The labor force is made up of two groups: the employed and the unemployed.
The number of people in the labor force is the sum of the number employed and the number unemployed.
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Who Is Employed?
To be counted as employed, a person must have either a full-time or part-time job.
Those with part-time jobs are counted as employed even if they would accept full-time employment if it was offered.
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Who Is Unemployed? To be counted as unemployed, a
person must be available for work and be in one of three categories: Without work, but has made specific
efforts to find work during the previous four weeks
Waiting to be called back to a job from which he or she has been laid off
Waiting to start a new job within the next 30 days.
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LS80
Labor Force Reallocation
Labor (millions of people)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
18 30
10.00
LD80
Services
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Full Employment
Full employment occurs when the unemployment rate equals the natural rate of unemployment.
The unemployment rate will not be zero at full employment because there will still be frictional and structural unemployment.
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Explaining Employmentand Wage Rates
Demand and Supply in the Labor Market The labor demand curve shows the
quantity of labor that firms plan to hire at each possible real wage rate.
• Firms attempt to maximize profits
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Explaining Employmentand Wage Rates
Demand and Supply in the Labor Market The labor supply curve shows the
quantity of labor that households plan to supply at each possible real wage rate.
• Households strive to use their scarce time in the most efficient way
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The Labor Market
Labor (billions of hours per year)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
14
15
16
0 215 MACRO HAPPENS
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The Labor Market
Labor (billions of hours per year)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
14
15
16
0 215
LD
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The Labor Market
Labor (billions of hours per year)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
14
15
16
0 215
LS
LD
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The Labor Market
Labor (billions of hours per year)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
14
15
16
0 215
LS
LD
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The Labor Market
Labor (billions of hours per year)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
14
15
16
0 215
LS
LD
Labor surplus
Full employment
Labor shortage
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Explaining Employmentand Wage Rates
The Trends in Employment and Wage Rates Since 1960, aggregate hours has increased
from 125 billion to 218 billion in 1996 Real wages increased from $11 an hour to $15
an hour Technology has made workers more productive The demand for labor has increased as has the
population
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Explaining Labor Market Trends
Labor (billions of hours per year)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
11.00
15.00
125 218 300
LD60
LS60
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Explaining Labor Market Trends
Labor (billions of hours per year)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
11.00
15.00
125 218 300
LD60
LS60
LD96
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Explaining Labor Market Trends
Labor (billions of hours per year)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
11.00
15.00
125 218 300
LD60
LS96LS60
LD96
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Explaining Labor Market Trends
Labor (billions of hours per year)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
11.00
15.00
125 218 300
LD60
LS96LS60
LD96
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Explaining Employmentand Wage Rates
Changes in the Distribution of Jobs and Wage Rates Wage rates of manufacturing
nonsupervisory workers has decreased
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Labor Force Reallocation
Labor (millions of people)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
12.60
18
LSM
20 30
LD80
Manufacturing
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Labor Force Reallocation
Labor (millions of people)
Rea
l wag
e ra
te (
1992
dol
lars
per
hou
r)
12.60
18
LD80
LSM
20
11.80
30
LD96
Manufacturing
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