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Unemployment

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Unemployment

 Looking at GDP per capita misses a lot

 Income inequality (among those with income)

 Unemployment (those with no income)

 Before we can talk about it, need to know how

it’s measured

 Today: Unemployment and focused on the US

 Focus: What does it really tell us? What does it

leave out?

Common News Item

 January 2016: Headline Unemployment is 4.9%

 Unemployment has something to do with how

many people are out of work

 What exactly does this number measure, and

how is it computed?

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• UNEMPLOYMENT

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Labor Force Statistics

BLS divides population into 3 groups:

 Employed : paid employees, self-employed,

and unpaid workers in a family business

 Unemployed : people not working who have

looked for work during previous 4 weeks

 Not in the labor force : everyone else

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Labor Force Statistics

The labor force is the civilian population 16 years and over. Excluded are:

 persons confined to institutions (nursing homes,

prisons)

• prison/jail population in 2008: 2.3 million (source: BJS)

 persons on active duty in the armed forces

• 1.4 million in army, navy, air force, and marine corps as of December 2009 (source: DOD)
• 42,000 in coast guard as of August 2009 (source; USCG)

A C T I V E L E A R N I N G 1 Calculate labor force statistics

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Compute the labor force, u-rate, adult population, and labor force participation rate using this data:

Adult population of the U.S. by group, June 2008

of employed 145.9 million

of unemployed 8.5 million

not in labor force 79.2 million

Labor force = employed + unemployed = 145.9 + 8. = 154.4 million

U-rate = 100 x (unemployed)/(labor force) = 100 x 8.5/154. = 5.5%

A C T I V E L E A R N I N G 1

Answers

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Labor Market Statistics for Different Groups

 The BLS publishes these statistics for

demographic groups within the population.

 These data reveal widely different labor market

experiences for different groups.

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BLS Report

http://www.bls.gov/news.release/pdf/empsit.pdf

A C T I V E L E A R N I N G 2

Answers

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A. Sue lost her job and begins looking for a new one. u-rate rises A rising u-rate gives the impression that the labor market is worsening, and it is.

A C T I V E L E A R N I N G 2

Answers

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B. Jon has been out of work since last year, becomes discouraged, stops looking for work. Discouraged workers  would like to work but have given up looking for jobs  classified as “not in the labor force” rather than “unemployed” U-rate falls because Jon is no longer counted as unemployed. A falling u-rate gives the impression that the labor market is improving, but it is not.

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What Does the U-Rate Really Measure?  The u-rate is not a perfect indicator of joblessness or the health of the labor market:  It excludes discouraged workers.  It does not distinguish between full-time and part-time work, or people working part time because full-time jobs not available.  Some people misreport their work status in the BLS survey.  Despite these issues, the u-rate is still a very useful barometer of the labor market & economy.  …but is it very good?

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Employment-Population Ratio