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Unit 5: Full Employment

Unit 5: Full Employment. In the long run, the right answer to unemployment is to create more jobs. - George Walker Bush, Unemployment is of vital importance, particularly to the unemployed. - Edward Heath Business will be either better or worse.

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Unit 5: Full Employment

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  1. Unit 5: Full Employment • In the long run, the right answer to unemployment is to create more jobs. • - George Walker Bush, • Unemployment is of vital importance, particularly to the unemployed. • - Edward Heath • Business will be either better or worse. • When more and more people are thrown out of jobs, unemployment tends to rise. • - Calvin Coolidge

  2. Society's Goals for Macro System • Growth • Stable Prices & Money • Full Employment • Stability of Business Cycle

  3. Key Measures: • Unemployment Rate • Labor Force Participation Rate • Employment-Population Rate • Net New Jobs Create • New Unemployment Claims • Jobs-workers ratio

  4. Unemployment in the U.S. US Unemployment Data - BLS.gov

  5. Population Institutional Pop.Children (<16)Active Duty Military RetiredDon't want employment nowIn SchoolDiscouraged - quit looking for work Not In Labor Force AdultNon-InstitutionalCivilianPop. [A] Employed [C] Unemployed [D](Not Employed, But Actively Looking) Labor Force [B](willing & able to work) Voluntary Quit Involuntary Quit Returning New Entrant Analyzing employment

  6. Defining “Adult Civilian Non-Institutionalized Population” • = labor force + not-in-labor-force • = total population – institutionalized – active duty military – children under age 16

  7. Defining “Employed”: person is working regardless of type or num of hours/jobs.

  8. Defining “Unemployed”: no job, but willing, able, and actively looking for work.

  9. Defining Labor force: • unemployed + employed

  10. Defining “Not-in-labor force: • retired, stay-at-home spouses, idle rich, non-working students, discouraged would-be workers (not looking)

  11. Unemployment Rate:= Unemployed / Labor Force • Excludes discouraged workers

  12. Labor Force Participation Rate: • = Labor Force / Civ.N-I Adult Pop. • = (employed + unemployed) / CivN-IA Pop

  13. Employment Population Ratio • = employed / population

  14. Why don’t the unemployed have a job right now? 4 Types of Unemployment:

  15. Frictional: open job exists for each unemployed worker but they haven’t matched up yet

  16. Structural: open jobs exist but require skills/locations that match workers’

  17. Seasonal: temporary situation because job only exists during certain months of year.

  18. Cyclical: more unemployed workers than available open jobs.

  19. Policy Goal: ‘full employment’, but that doesn’t mean 0% rate.

  20. NATURAL RATE OF UNEMPLOYMENT: economy at capacity with zero frictional unemployment.

  21. Full Employment is usually defined as achieving the “natural rate” or zero cyclical.

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