Labor & Unemployment

The labor force consists of civilian non-institutionalized

individuals aged 16 and over (ABLE) who are either working or

are unemployed but actively seeking work in the last 4 weeks

(WILLING).

The discouraged worker are those who have given up on their job search because they believe no jobs were available for them.

Those who are underemployedhave taken part-time work but prefer full-time work or have taken a job for which they are overqualified.

Total Population

Persons under 16

Person in the armed forces

Persons institutionalized

Civilian non-

institutionalized Population

over 16

Not in labor force

Civilian labor force

Employed Unemployed

and actively

seeking work

(ABLE)

(WILLING)

(NOT ABLE)

(NOT WILLING)

Bureau of

Labor Statistics

� “Employment Situation” report is released on the first Friday of each month .�Current Population Survey (CPS) - about 60,000

households (approx 110,000 individuals) are interviewed about their employment status.

�Current Employment Statistics (CES) – about 145,000 businesses and gov’t agencies (representing about 557,000 individual work sites) are interviewed about the employment, hours and earnings of employees on nonfarm payrolls.

July 2016– Labor Force

• Calculating the Labor Force Participation Rate

• What is the LFPR for June 2016?

▫ (158,880/253,397)*100 = 62.7%

x 100LFPR=civilian labor force

civilian non-institutionalized population

Practice Problem

If there are 90 million people employed full-time,

10 million unemployed that are activity seeking work, 5 million part-time workers, and 5 million

discouraged workers, how many are in the labor

force.

July 2016– Employment Rate

• Calculating the Employment Rate (Em ployment-Population Ratio)

• What is the ER for June 2016?

▫ (151,097/253,397)*100 = 59.6%

Number of employed persons

civilian non-institutionalized population X 100ER=

Unemployment• The unemployment rate is the percentage of the labor

force that is willing and able to work, does not currently have a job but has been looking for the last 4 weeks.

Does not include:▫ BLS – “Marginally attached to the labor force” –

were able and wanted to work and had looked for a job in the past 12 months but had since stopped looking the last 4 weeks

� “discouraged workers” - are not currently looking bc they believe there are no jobs for them.

� The remaining stopped looking for reasons such as school attendance or family responsibilities.

▫ BLS – “Part time for economic reasons”(aka underemployed) - these individuals are working part time because their hours were cut or they could not find full time work.

Employed, Unemployed or Not Counted?

1. A stay-at-home parent.2. A SPHS student who works 5 hrs/week at

Starbucks.3. A full-time college student looking for part-

time work.4. A murderer serving 25 years to life. 5. A retired doctor. 6. A lawyer who works at Starbucks.

7. An unemployed CPA who stopped looking for work 5 weeks ago.

• Calculating the Unemployment Rate

• What is the UR for June 2016?

▫ (7,781/158,880)*100 = 4.9%

• Did the economy worsen from May to June and July?

▫ No, it actually appears to have improved. Why?

▫ The UR increased bc the LFPR increased. More people felt confident enough about the economy to join the LF.

Number of unemployed persons

civilian labor forcex 100UR=

• If the UR decreased but the LFPR also decreased,

did the employment situation improve?

▫ No, people who would have been seeking work are

no longer counted bc they dropped out of the LF.

States with Low Unemployment Rates• http://www.nbcnews.com/id/38838429/#.Uop

0tSePiRM

• A diverse mix of industries (tourism helps!)

• Natural resources

• Skilled labor force

Practice Problem

BLS: July 2016 Employment SituationNews Release: August 5, 2016Unemployment Rate: 4.9%

Unemployed Persons: 7.8 million

Nonfarm Payroll Employment: +255,000 jobs

How is our economy doing?

July’s Employment Situation:

The Good, the Bad and the Ugly

• Using the BLS data given to you, review and

analyze the data. Find a total of 10 indicators.

The Good the Bad and the Ugly

How is the employment situation really doing?

What grade would you give our economy? Explain why.

July 2015

May2016

June2016

July 2016

Change from June 2016 to

July 2016

July2015

May 2016

June2016

July 2016

Change from June

to July 2016

July2015

May 2016

June2016

July 2016

What is wrong with the unemployment rate?

It can misdiagnose the actual unemployment rate because of the following:

Discouraged job seekers-•Some people are no longer looking for a job because they have given up.

Part-Time Workers-•Someone who wants more shifts but can’t get them is still considered employed.

Criticisms of the Unemployment Rate

http://www.npr.org/blogs/money/2013/04/04/175697813/23-million-americans-are-unemployed-or-underemployed

Unemployment, Historical Data

Unemployment: A Reviewhttps://www.youtube.com/watch?v=DnL7Br8gc3Q

Types of Unemployment

1. Frictional – temporarily between jobs or just entering the job market; due to the time spent in a job search

2. Seasonal – employment based on seasonal changes

3. Structural – when someone’s skills are no longer needed or aligned with the needs of the economy.

4. Cyclical – when the demand for goods & services falls (recessions).

Can the unemployment rate ever fall to zero?

No, jobs are constantly being created and destroyed because of structural changes in the economy and also because job searches can take time.

Frictional and structural unemployment can not be eliminated. Together they make up the natural rate of unemployment.

We are at full employmentif we have only the natural rate of unemployment (no cyclical unemployment).

natural rate of unemployment = full employment = no cyclical employment

How will the following changes affect

the natural rate of unemployment?

a. The government reduces the time during which

an unemployed worker can receive unemployment benefits.

b. More teenagers focus on their studies and do not look for jobs until after college.

c. Greater access to the internet lead both

potential employers and potential employees

to use the internet to list and find jobs.