Lecture 7.pptx
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Principles of Macroeconomics
ECON203,
Lecture 7: Jobs (employment) and
Unemployment
Instructor: Turki Abalala
Lessons Objectives
After taking the lessons of this week, you should be able to:
• Understand the terms; labor force, employment, unemployment,
employed, unemployed, full employment, sources of
unemployment, types of unemployment, potential GDP, and
output gap.
• Calculate unemployment rate and labor force participation rate,
• Understand the relationship between unemployment and output
gap
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Class Outline
Labor Market Indicators
• The Unemployment Rate
• The labor force participation Rate
Sources of unemployment
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Labor Market Indicators
Current Population Survey
It is a survey that conducted by the Bureau of Labor Statistics and
the Bureau of the Census to collect accurate labor force data.
Working-age population
• Working-age population is the total number of people aged 16
years and over who are not in a jail, hospital, or some other form
of institutional care or in military.
• It is divided into those in the labor force and those who are not in
the labor force
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Labor Market Indicators
Labor Force
• Labor force refers to all citizens 16 years of age and older who are
working or looking for work except the peoples who are in
prisons, hospital, or under in other institutional care, and in
military.
• It is the number of people employed plus the number
unemployed. Labor force = employed + unemployed population
• For example: In June 2009, the U.S. labor force was 154.9
million— 140.2 million people were employed and 14.7 million
people were unemployed.
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Labor Market Indicators
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Labor Market Indicators
Population Survey Criteria
The survey counts as employed all persons who, during the
week before the survey, either:
1. Worked at least 1 hour in a paid job or 15 hours unpaid in
family business.
2. Were not working but who had jobs from which they were
temporarily absent.
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Labor Market Indicators
The survey counts as unemployed all persons who, during the
week before the survey:
1. Had no employment
2. Were available for work,
and either:
1. Had made efforts to find employment during the previous
four weeks, or
2. Were waiting to be recalled to a job from which they had
been laid off.
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Labor Market Indicators
Two Main Market Indicators:
1. The Unemployment rate.
2. The Labor Force Participation rate.
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Labor Market Indicators
Unemployment Rate:
• Unemployment (Joblessness) occurs when a person who is
actively searching for a job is unable to find one. This person is
called unemployed.
• Unemployment rate is the percentage of people in the labor force
who are unemployed, to calculate this rate:
• Example:
In Saudi Arabia, the number of people unemployed in 2010 was
2million and the labor force was 25 million. What is the
unemployment rate?
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Labor Market Indicators
Labor Force Participation Rate
It is the percentage of the working-age population who are
members of the labor force.
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Labor Market Indicators
Alternative Measures of Unemployment
The official definition of unemployment omits two types of
labor:
1. Marginally attached worker
2. Part-time workers
A marginally attached worker is a person who does not have
a job, is available and willing to work, has not made specific
efforts to find a job within the previous four weeks, but has
looked for work sometime in the recent past.
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Labor Market Indicators
Discouraged worker is a marginally attached worker who has
not made specific efforts to find a job within the previous four
weeks because previous unsuccessful attempts were
discouraging.
• In June 2009, 860,000 people were discouraged workers
and 1,256,000 people were other marginally attached
workers.
• Adding these workers to the number unemployed and the
labor force, the unemployment rate becomes 10.8 percent.
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Labor Market Indicators
Part-Time workers
• Full-time workers are people who usually work 35 hours or
more a week.
• Part-time workers are people who usually work less than 35
hours a week. Those are divided into two groups
1. Part-time for economic reasons are people who work 1 to
34 hours per week but are looking for full-time work.
(Also called involuntary part-time workers)
2. Part-time for noneconomic reasons which includes those
with health problems, family or personal responsibilities
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Sources of Unemployment
People become unemployed if they are;
1. Job losers - people who are laid off from their jobs
2. Job leavers - people who voluntarily quit their jobs
3. Entrants and reentrants - people who have just left school or
who are now looking for a job after a period out of the labor
force.
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Sources of Unemployment
1. Job losers:
A job looser is someone who is laid off from a job, either
permanently or temporarily.
People lose their jobs for many reasons;
Some people are not a good match for their jobs.
Firms fail, downsize or a new technology destroys some types
of jobs.
A job looser who decided to look for a new job remains in the
labor force and becomes unemployed.
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Sources of Unemployment
2. Job leavers:
A job leaver is someone who voluntarily quits a job.
Usually , people leave their jobs for a reason:
Either they have found a better one.
Or, they have decided to withdraw from the labor force
However, both of these two do not become unemployed.
But, few people quit their jobs because they want to spend time
looking for a better one, these job leavers become unemployed.
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Sources of Unemployment
3. Entrants or reentrants:
An entrant is someone who has just finished school and is looking
for a job.
Many entrants spend time looking for first job and during this
period they are unemployed.
A reentrant is someone who has previously had a job, has then
quit and left the labor force, and has now decided to look for a job
again.
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Sources of Unemployment
People who end a period of unemployed are
• Hires—people who have been unemployed and have started new
jobs
• Recalls—people who have been temporarily laid off and has
started work again
• Withdrawals—people who have been unemployed and have
decided to stop looking for jobs.
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Reference
Chapter 6 of “Foundations of Macroeconomics”
Pages. 144-146 and 155-156
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Now it’s over for today.
Any question?
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