In this lesson summary review and remind yourself of the key terms and calculations used in measuring unemployment, the labor force, the unemployment rate, the labor force participation rate, and the natural rate of unemployment. Topics include cyclical, seasonal, frictional, and structural unemployment.
Log in Raaghav Chaudhry 6 years agoPosted 6 years ago. Direct link to Raaghav Chaudhry's post “why isnt the military cou...” why isnt the military counted as labor force? • (15 votes) melanie 6 years agoPosted 6 years ago. Direct link to melanie's post “There is an interesting h...” There is an interesting history behind that, and the reason has more to do with practicalities than anything else. When the unemployment rate first began being calculated in the United States the military operated under a draft system which meant that kind of labor is very different from a voluntary labor force. In the 1980s, after the US moved to an all volunteer military, the Bureau of Labor Statistics decided to start counting the military in labor statistics. But it turns out this is tricker than it sounds. For example, is a person who is a resident of Florida but temporarily stationed in Germany employed in Florida or Germany? It turned out that the labor statistics really did not change at all when the military started to be counted, but the additional expense of dealing with all the peculiarities of that data added a lot to the cost of calculating the unemployment rate. So, it was decided to go back to omitting the military. (36 votes) devcdesai 6 years agoPosted 6 years ago. Direct link to devcdesai's post “Why is there no upper age...” Why is there no upper age limit for calculating the • (12 votes) rjohnson98126 5 years agoPosted 5 years ago. Direct link to rjohnson98126's post “they ARE excluded from th...” they ARE excluded from the labor force, if they both arent working AND aren't looking for work. like if they're retired. they're just not part of the labor force, whatever age they might be they are INCLUDED in the labor force, if they're EITHER working OR actively looking for work it would make no sense whatsoever to arbitrarily exclude people based on age (6 votes) devcdesai 6 years agoPosted 6 years ago. Direct link to devcdesai's post “If I am a citizen of coun...” If I am a citizen of country X but currently working in country Y, then am I counted in the employment figures of country X or country Y? • (10 votes) LunarDeity 2 years agoPosted 2 years ago. Direct link to LunarDeity's post “When you work in Country ...” When you work in Country Y, employment figures only count for Country Y, not for X (3 votes) devcdesai 6 years agoPosted 6 years ago. Direct link to devcdesai's post “How is the 'Natural Rate'...” How is the 'Natural Rate' of unemployment, 'Frictional Unemployment' and 'Structural Unemployment' practically calculated? How does the computing authority know which skills are obsolete and which are not? • (4 votes) Andrew M 6 years agoPosted 6 years ago. Direct link to Andrew M's post “There is no calculation t...” There is no calculation that gives the answer. Economists have to estimate it based on observations about what's going on in the labor market and what's going on with inflation. For a long time the consensus view was that the natural rate would be around 5% but now a lot of economists are wondering if maybe it's lower. (5 votes) stphnchvs 6 years agoPosted 6 years ago. Direct link to stphnchvs's post “How can unemployment and ...” How can unemployment and employment rise at the same time? • (3 votes) melanie 6 years agoPosted 6 years ago. Direct link to melanie's post “Can you clarify? Is this ...” Can you clarify? Is this comment about an error you spotted, or how something like this is possible? If it is the latter, how is it possible for the unemployment rate to increase, even while employment is increasing, the answer is that its all about labor force participation. For example, suppose you have 100 potential workers in an economy. Only 80 of them are in the labor force (maybe the other 20 are so discouraged they gave up looking and are not in the labor force). Of those 80 in the labor force, suppose 65 are employed and 15 are unemployed. This yields an unemployment rate of 18.75%: (5 votes) Liam Mullany 6 years agoPosted 6 years ago. Direct link to Liam Mullany's post “Could it be said that the...” Could it be said that the natural employment rate is the Long term unemployment rate? (To put it in the terms we were using before with long and short run supply/demand) • (3 votes) melanie 6 years agoPosted 6 years ago. Direct link to melanie's post “The term "long-term unemp...” The term "long-term unemployment" generally refers to people who have been unemployed for a very long time (such as more than 27 weeks in the United States), rather than a long-run trend in unemployment. The concept of a natural rate of unemployment doesn't necessarily imply that society cannot do anything to alter that rate, the concept of NRU is that things like monetary and fiscal policy will not alter the unemployment rate in the long run. The amount of unemployment that is "natural" is dependent on the underlying labor market structure, which depends on things like demographics and labor market characteristics. (5 votes) Nicholas Turecamo 5 years agoPosted 5 years ago. Direct link to Nicholas Turecamo's post “Shouldn't Abby be conside...” Shouldn't Abby be considered Out of the Labor Force? She is looking for a job for the future, but she wouldn't be able to accept it to start immediately if it were offered to her because she's still in school full-time. • (2 votes) melanie 5 years agoPosted 5 years ago. Direct link to melanie's post “She can accept an offer, ...” She can accept an offer, even if she does not start immediately. This is pretty standard for students who are about to graduate. (2 votes) Mukilan sethuraman 5 years agoPosted 5 years ago. Direct link to Mukilan sethuraman's post “"the full employment outp...” "the full employment output would be a combination of output that is on that country’s PPC." what this statement is meant to be? • (2 votes) Hinklet Everest 4 years agoPosted 4 years ago. Direct link to Hinklet Everest's post “It refers to the Producti...” It refers to the Production Possibilities Curve, or the Production Possibilities Frontier. If you take a peek at the micro-economics segment you can get a better idea of what such a thing is. In unduly brief summary: It represents the achievable outcomes when an economy is producing at its current max efficiency/capacity, and movements along the Production Possibilities Curve show tradeoffs between production of one thing and production of another. (1 vote) frankbansah1998 3 years agoPosted 3 years ago. Direct link to frankbansah1998's post “is an increase in unemplo...” is an increase in unemployment rate necessarily a good thing for a nation? • (2 votes) Mastermind Vivaan 3 years agoPosted 3 years ago. Direct link to Mastermind Vivaan's post “No, a decrease in the une...” No, a decrease in the unemployment rate is not necessarily a good thing for a nation. ... Since unemployment only measures those seeking a job and not those who would work but no longer believe they can find work, the drop in unemployment may reflect a stagnating national economy. (1 vote) Bryan 4 years agoPosted 4 years ago. Direct link to Bryan's post “I don't quite understand ...” I don't quite understand the paragraph; If firms, during economic expansions, are hiring workers who would normally be frictionally unemployed, wouldn't frictional unemployment decrease and therefore NRU decreases, along with the decrease in the actual unemployment rate? How is it that the actual unemployment rate is less than the NRU then? • (2 votes) Eirian 4 years agoPosted 4 years ago. Direct link to Eirian's post “Sal did say in the video ...” Sal did say in the video that NRU is the employment rate if it wasn't for economic cycles. I'm also confused, though, since frictional unemployment is indeed a component of NRU... (1 vote)Want to join the conversation?
eligible population when calculating the LFPR? I mean should people above an arbitrary age like 60 or 65 years be excluded from the labour force? In Q2, I actually omitted the 20k odd retired people (assuming they had reached the age of retirement) and then saw that in the answer provided they are part of eligible population.
#unemployed/# in labor force x 100% = 15/80 x 100% = 18.75%
Now, suppose there is some attitude change, like people become optimistic about the economy. 4 of those people not in the labor force decide to start looking again, which puts them back in the labor force. Suppose 1 of them even instantly gets a job! That means the numbers are now:
Labor force=84 (the 80 before, plus the 4 that re-entered the labor force), # employed=66 (the 65 from before, plus the person who re-entered and instantly found a job), #unemployed = 18 (the 15 from before, plus the 3 who just re-entered the labor force who are looking). So employment has increased. What about the unemployment rate?
# unemployed/# in labor force x 100% = 18/84 x 100% = 21.43%
So the unemployment rate actually increased! This is why it is important to look at employment data in its totality, rather than just the official unemployment rate in isolation.
I think natural unemployment (NRU) is a highly politicised term because it suggests that there is a natural rate which cannot be altered by society. This is obviously not true as a decrease in frictional employment (caused by an improvement in communication between employers and potential employees) would have an effect on the NRU
The actual unemployment rate is lower than the natural rate of unemployment. What is actually going on is that some people who are frictionally unemployed become employed, even though under normal circ*mstances they would still be unemployed. When firms get desperate for workers, they might be more willing to hire whoever they can, even if that person is not a great fit for the job.
