Chapter 9: Unemployment and Inflation

Misery Index

Unemployment rate + Inflation

Frictional Unemployment

• Short-term due to process of matching workers with jobs

• Caused by normal labor market turnover of firms and workers

Structural Unemployment

• Due to persistent mismatch between skills of workers and requirement of jobs

• Caused by structural changes in economy

Cyclical

caused by business cycle recession

Household Survey

• Current population survey of 60,000 households

• Employment status of everyone over 16 years old

Establishment Survey (Poll Survey)

• Samples about 300,000 business establishments

• Persons employed on a company payroll

To Be Counted Unemployed

• Don’t have a job

• Available for work

• Actively looked for work in the last 4 weeks

Calculating Unemployment Rate

• Unemployed/Labor force

  • Labor Force=Employed+Unemployed

Reasons Unemployment may be Understated

• Discouraged workers

• Involuntary part-time workers

Reasons Unemployment may be Overstated

• Some people claim to be actively looking for work, but are not

• Jobs in undergound economy