Working-Age Population
Total number of people in US 16 and older who are not in jail, an institution or the military
Labor Force
Number of people employed plus number of people unemployed
Employed
If during the week prior they worked at least 1 hour as paid employees or were not working but had jobs or businesses from which they were temporarily absent
Unemployed
All people during the week before had no employment or were available for work and made specific efforts to find employment in the previous 4 weeks
Two Main Labor Market Indicators
Unemployment Rate, Labor Force Participation Rate
Unemployment Rate
Percentage of he people in the labor force who are unemployed
Unemployment Rate Formula
Number of people employed/labor force X 100
Labor Force Participation Rate
The percentage of the working age population who are members of the labor force
Labor Force Participation Rate
Labor force/working-age population x 100
Unemployment Definition Omits
Marginally attached workers, part-time workers
Marginally Attached Worker
A person who doesn't have a job, bur hasn't made efforts to find a job within the previous 4 weeks
Discouraged worker
A marginally attached worker who has not made specific efforts to find a job in the past 4 weeks because unsuccessful attempts were discouraging
Full-Time Workers
Those who work more than 35 hours a week
Part-Time Workers
Those who work less than 35 hours a week
Part-Time (Economic)
People who work 1-34 hours but are looking for full-time work
Part-Time (Non-Economic)
Do not want full time work and are not available for such work
Labor Force Participation (Gender)
Falling percentage of males rising percentage of females
U-3
The employment rate based on the standard definition of employment
U-1
Percentage of the labor force that has been unemployed for 5 weeks or more and is a measure of long-term voluntary unemployment
U-2
Percentage of labor force who are laid off and is using another measure of involuntary employment
U-6
Includes people who work part time for economic reasons
Frictional Unemployment
The unemployment that arises from people entering and leaving the labor force. Quitting jobs to find better ones, from ongoing creation and destruction of jobs
Structural Unemployment
Unemployment that arises when changes in technology or international competition change skills needed to perform jobs or change location of jobs
Cyclical Unemployment
The higher than normal unemployment at a business cycle trough and the lower than normal unemployment at a business cycle peak
Natural Unemployment
The employment that arises from frictions and structural change when there is no cyclical unemployment
Full Employment
A situation in which the unemployment rate equals the natural employment rate
Natural Unemployment Rate Influenced By
Distribution of the population, the pace of the structural change, real wage rate, unemployment benefits
Age Distribution of the Population
Young population has high number of new job seekers, which leads to higher level of frictional unemployment
Pace of Structural Change
The amount of structural employment fluctuates with pace of technological change and the change driven by fierce international competition
Real Wage Rate
If real wage is raised above market equilibrium there is a surplus in labor and an increased natural unemployment rate
Federal Minimum Wage
Creates unemployment because it is set above the equilibrium wage rate of low-skilled young workers
Efficiency Wage
Set above the going market wage to enable firms to attract most productive workers, get them to work hard and discourage them from quitting
Unemployment Benefits
Increase natural employment rate by lowering the opportunity cost of a job search
Output Gap
Real GDP minus Potential GDP expressed as a percentage of potential GDP