Unemployment Defined and Measured

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From the course by University of California, Irvine

The Power of Macroeconomics: Economic Principles in the Real World

1255 ratings

University of California, Irvine

The Power of Macroeconomics: Economic Principles in the Real World

1255 ratings

In this course, you will learn all of the major principles of macroeconomics normally taught in a quarter or semester course to college undergraduates or MBA students. Perhaps more importantly, you will also learn how to apply these principles to a wide variety of situations in both your personal and professional lives. In this way, the Power of Macroeconomics will help you prosper in an increasingly competitive and globalized environment. This course is also available in Portuguese. To join the fully translated Portuguese version, visit this page: https://www.coursera.org/learn/macroeconomia-pt/

From the lesson

Unemployment, Inflation, and Stagflation

Some Basic Unemployment Concepts 4:26

Unemployment Defined and Measured 4:03

Okun's Law 3:48

Demand-Pull Versus Cost-Push Inflation and the Keynesian Dilemma6:22

Meet the Instructors

Dr. Peter Navarro
Professor
Paul Merage School of Business

[MUSIC]

So what technically is this unemployment rate?

And how is it measured?

Statistics on unemployment and the labor force are among the

most carefully designed and comprehensive economic data the United States collects.

The data are gathered monthly in a

procedure known as random sampling of the population.

Each month, about 60,000 households are

interviewed about their recent work history.

The survey divides the population 16 years and older into the following groups.

People without jobs, who are not looking for

work are categorized as not in the labor force.

This includes homemakers, students, retirees,

voluntarily idle and the non-working disabled.

This category also includes all persons incapable of working,

such as inmates in institutions and people under 16 years of age.

People with jobs are categorized as employed.

People without jobs who are looking for work are said to be unemployed.

And the labor force is simply equal to people

who are employed plus people who are not employed.

The unemployment rate then is simply the number of unemployed divided

by the labor force times 100. For example, if the

total unemployed is 8 million

and the labor force stands at

130 million. What's the unemployment rate?

The answer of course is 6.2%. This is simply 8 million

divided by 130 million which equals 0.062

and this times 100 equals 6.2%.

This figure shows the unemployment rate by race,

gender, and age, as well as by education.

You can see that the unemployment

rate steadily falls as education increases, high school

drop outs suffering the highest rate of unemployment.

You can also see that teenagers generally have the highest unemployment rate of

any demographic group while black teenagers have

experienced unemployment rates between 30 and 50%.

Is this unemployment frictional, structural or cyclical?

Recent evidence indicates that, particularly for whites,

teenage unemployment has a large frictional component.

Teenagers move in and out of the labor force very frequently.

They get jobs quickly and change jobs often.

Moreover, in most years half the unemployed teenagers are

new entrants who have never had a paying job before.

All these factors

suggest that teenage unemployment is largely frictional.

That is, it represents the job search and turnover necessary for young people

to discover their personal skills and to learn what working is all about.

What about black teenagers?

As you can see from the table, this group has by far the highest unemployment rate.

One possible reason is racial discrimination.

Another theory holds that a high minimum wage

tends to drive low-productivity black teenagers into unemployment.

Still another theory advanced by some conservative critics

of the modern welfare state, blame high unemployment

of blacks on the culture of dependency that

is nurtured by government welfare to the poor.

Unfortunately, there is insufficient empirical data

to resolve the issue, and the controversy over black teen unemployment is ongoing.

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