© 2010 Pearson Addison-Wesley

Labor Market IndicatorsLabor Market Indicators

• Three main labor market indicators.

• Unemployment Rate

• Employment to Population Ratio

• Labor Force participation Rate

• How to calculate above labor market indicators?

• Dynamics of Labor Market Indicators during economic Crises.

© 2010 Pearson Addison-Wesley

Employment and UnemploymentEmployment and Unemployment

Current Population Survey

The U.S. Census Bureau conducts a monthly population survey to determine the status of the U.S. labor force.

The population is divided into two groups:

1. The working-age population—the number of people aged 16 years and older who are not in jail, hospital, or some other institution

2. People too young to work (under 16 years of age) or in institutional care

© 2010 Pearson Addison-Wesley

Employment and UnemploymentEmployment and Unemployment

The working-age population is divided into two groups:

1.People not in the labor force : (People who are not looking for work because he or she does not want a job or has given up looking for a job).

2.People in the labor force.

The labor force is the sum of employed and unemployed workers)

© 2010 Pearson Addison-Wesley

Employment and UnemploymentEmployment and Unemployment

To be counted as unemployed, a person must be in one of the following two categories:

1. Without work but has made specific efforts to find a job within the previous four weeks.

2. Waiting to be called back to a job from which he or she has been laid off.

© 2010 Pearson Addison-Wesley

Employment and Unemployment

This figure shows the labor force categories in 2012 for the United States.

Population: 304.5 million

Working-age population: 233.8 million

Labor force: 154.6 million

Employment: 142.6 million

Unemployment: 12.0 million

© 2010 Pearson Addison-Wesley

Employment and Unemployment

Three Labor Market Indicators

The unemployment rate

The employment-to-population ratio

The labor force participation rate

© 2010 Pearson Addison-Wesley

Calculating Labor Market IndicatorsCalculating Labor Market Indicators

The Unemployment Rate

The unemployment rate is the percentage of the labor force that is unemployed.

Unemployment Rate = (Unemployed / Labor Force)*100 %

Example:

In 2012, the employment was 142.6 million and 12 million were unemployed. Find the Unemployment rate.

© 2010 Pearson Addison-Wesley

Calculating Labor Market IndicatorsCalculating Labor Market IndicatorsU

nem

ploy

men

t rat

e %

A : Official Unemployment rateB : Unemployment plus discouraged workersC : Unemployment plus discouraged workers plus all other persons marginally attached to the labor force

D: Unemployment plus discouraged workers, all other persons marginally attached to the labor force plus

employed part time workers for some economic reasons

© 2010 Pearson Addison-Wesley

Calculating Labor Market IndicatorsCalculating Labor Market IndicatorsU

nem

ploy

men

t rat

e %

© 2010 Pearson Addison-Wesley

Calculating Labor Market IndicatorsCalculating Labor Market Indicators

The Employment-to-Population Ratio

The employment-to-population ratio is the percentage of the working-age population who have jobs.

Employment to Population Ratio = ( Employment / WAP)*100%

Example:

In 2012, the employment was 142.6 million and the working-age population was 233.8 million. Find the employment to population ratio.

© 2010 Pearson Addison-Wesley

Calculating Labor Market IndicatorsCalculating Labor Market Indicators

The Labor Force Participation Rate

The labor force participation rate is the percentage of the working-age population who are members of the labor force.

The Labor Force Participation Rate = (Labor Force / WAP) *100%

Example:

In 2012, the labor force was 154.6 million and the working-age population was 233.8 million. Find the labor force participation rate.

© 2010 Pearson Addison-Wesley

Unemployment Rate vs. RecessionsUnemployment Rate vs. Recessions

Une

mpl

oym

ent r

ate

%

© 2010 Pearson Addison-Wesley

Unemployment during Great RecessionUnemployment during Great Recession

Une

mpl

oym

ent r

ate

%

© 2010 Pearson Addison-Wesley

Why do we face higher Unemployment Why do we face higher Unemployment Rates during Recessions?Rates during Recessions?