Unit 5 full employment
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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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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


Society's Goals for Macro System

  • Growth

  • Stable Prices & Money

  • Full Employment

  • Stability of Business Cycle


Key Measures:

  • Unemployment Rate

  • Labor Force Participation Rate

  • Employment-Population Rate

  • Net New Jobs Create

  • New Unemployment Claims

  • Jobs-workers ratio


Unemployment in the U.S.

US Unemployment Data - BLS.gov


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


Defining “Adult Civilian Non-Institutionalized Population”

  • = labor force + not-in-labor-force

  • = total population – institutionalized – active duty military – children under age 16


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


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


Defining Labor force:

  • unemployed + employed


Defining “Not-in-labor force:

  • retired, stay-at-home spouses, idle rich, non-working students, discouraged would-be workers (not looking)


Unemployment Rate:= Unemployed / Labor Force

  • Excludes discouraged workers


Labor Force Participation Rate:

  • = Labor Force / Civ.N-I Adult Pop.

  • = (employed + unemployed) / CivN-IA Pop


Employment Population Ratio

  • = employed / population


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


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


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


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


Cyclical: more unemployed workers than available open jobs.


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


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


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


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