ECO285 - Macroeconomics
The Nature
and Concepts
of
Unemployment
peak
contraction
recovery
trough
Dr. Dennis Foster
Unemployment

Measured rate depends on
– the population,
– the civilian population,
– the civilian population over 16 yrs. old (&…),
– the labor force,
– and whether one is looking for work.
January 2015 - Getting from A to Z
Who is employed &
who is unemployed?

To be employed, you have to be working (!)
•
•
•
•

at least 1 hour during survey week
or, absent from work due to illness/vacation/strike
on a maternity leave
are an unpaid family member
To be unemployed, you have to be:
•
•
•
•
in the labor force
willing to work
able to work
and looking for work
Data – Unemployment Rate (Ur) =
(#unemployed)/(#labor force)
5.1%
5.7%
Data – seasonal adjustments

To remove the influence of predictable
seasonal fluctuations, such as:
– Students graduating in May and entering the labor
force.
– Christmas shopping season and temporary boost
in employees.
– Other seasonal activities – Snowbowl, Grand
Canyon, et al.
– Typical weather-related effects on employment.
– Other holiday effects.

All the data you see is adjusted.
Why do people become unemployed?
Good News for You!
A paradox about unemployment
Can the number of people
employed rise at the same
time as the unemployment
rate rises?
Yes!!!
If the labor force is rising at the same time.
For example: Ur = 5,000/100,000 = 5%,
and, now Ur = 7,500/110,000 = 6.82%,
Labor Force, employed, unemployed, Ur rate
+10,000
+7,500
+2,500
Unemployment Types



Frictional Unemployment
 People between jobs (quit, fired, new entrants,
reentrants)
 Normal and necessary (!)
 Most unemployed find jobs quickly.
Structural Unemployment
 Permanent job loss (technological change, trade
effects)
 Economic growth exacerbates this.
Cyclical Unemployment
• Temporary unemployment due to recession.
• Generally, the focal point of government fiscal policy.
Unemployment Types: Special Cases

Seasonal Unemployment
• Examples: Snowbowl, Agriculture …
• Data adjusts for seasonal variation.

Induced Unemployment
• Due to government policies.
• Examples: Min. wage, Housing regs., ObamaCare
• May work the other way: Airline deregulation in
1980 boosted employment about 50% soon
thereafter.
ECO285 - Macroeconomics
The Nature
and Concepts
of
Unemployment
peak
contraction
recovery
trough
Dr. Dennis Foster