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Chapter 9

Chapter 9 – Unemployment and Its Natural Rate.docx

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Bridget O' Shaughnessy

ndEconomics Textbook March 2 2012Chapter 9Unemployment and Its Natural RateNatural rate of unemploymentrefers to the amount of unemployment that the economy normally experiencesThis type of unemployment does not go away on its own even in the long runCyclical unemploymentrefers to the yeartoyear fluctuations in employment around its natural rate and it is closely associates with the shortrun up and downs of economic activityFour explanations for the economys natural rate of unemployment job search minimumwage laws unions and efficiency wagesHow is unemployment measured Measuring unemployment is the job of Stats Canadamonthly labor force survey of 50000 households Puts each adult 15 and up in each surveyed household on one of three categoriesEmployedworked within the last week at a paid jobUnemployedtemporary layoff or is looking for a jobNot in the labor forceperson who fits neither above category ie full time student homemaker or retireeLabor forcetotal number or workers including both the employed and unemployed Labor force of employed of unemployedUnemployment ratepercentage of labor force that is unemployedOf unemployedUnemployment rate x 100 Labor forceLabor force participation ratepercentage of the adult population that is in the labor force Labor force Labor force participation rate x 100 Adult populationThe recession affected the employment of men more than womenmancessionDoes the unemployment rate measure what we want it to Almost half of all spells of unemployment end when the unemployed person leaves the labor forceDiscouraged searchersindividuals who would like to work but have given up looking for a jobThese people do not show up in unemployment eve though they are workers
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