22 Apr 2012
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Chapter 9: Unemployment and Its Natural Rate
February 8th, 2012
Identifying unemployment
- Produced by STATS CAN
- Data collected by surveying ppl
- Based on adult population (15years or older)
Labour force STATS
- They divide pop into 3 groups
- Employed- a person considered if he or she has spent most of the previous week working at a
paid job
- Unemployed – temporarily layoff, is looking for a job, or is waiting for the start date of a new
job
- Not in the labour force – everyone else (retired, students, ppl don’t want a job)
Labour force – total # employed and unemployed
Unemployment Rate = 100 x # unemployed / Labour force
Labour force participation rate: 100 x labour force / adult population
EX: Labour force = 17180 +1493 = 18673 thousand
Unemployment rate = (1493/18673) x 100 = 8%
Adult population = 18673 + 9062 = 27735
LFPR = (18673/27735) x 100 = 67.3%
Labour market experiences of various demographics groups
- Unemployment is increasing this year b/c more people are looking for a job
Limitations of the u-rate:
1. Losing job and looking for a new one
- Unemployment rate rises. A rising u-rate gives the impression that the labour market is wrong,
but its not.
2. People become discouraged and gives up looking for a job
- Unemployment rate decreases b/c they are no longer counted as unemployed. A falling u-rate
gives the impression that the labour market is improving, but it’s not.
3. A person looses their full time job and takes a part time job.
- Unemployment rate is unchanged because the person is still employed.
`Most duration of unemployment is short
Natural rate of unemployment- rate of unemployment to which the economy tends to return in
the long run. If the rate is between 6 and 8, it is considered normal.
Cyclical unemployment –Difference between the observed u-rate and natural u-rate
Friction unemployment – it takes time to find a job that best suits their skills and tastes
Structural unemployment – happens when there are fewer jobs than workers