1.3 Measuring the macroeconomy: output, employment, unemployment, and inactivity

what do we focus on to understand how the whole economy works?

aggregate measures i.e. total employment, unemployment rate, and aggregate output

important indicators of the performance of the macroeconomy

aggregate output, state of labor market

population of working age

total population - children - anyone over age of 64

divided into two parts: labor force and economically inactive

economically inactive

people not in the labor force who are not employed or actively seeking work i.e. can’t work bc of sickness or disability, students who aren’t working, or parents staying at home to raise children

who can be considered employed or unemployed?

ONLY members of the labor force can be considered employed or unemployed

labor market statistics

useful for evaluating labor market performance and comparing them i.e. participatino rate, unemployment rate, employment rate

participation rate

shows proportion of working-age population in the labor force
= labor force / working age
= (employed + unemployed) / working age

unemployment rate

proportion of labor force that is unemployed

= unemployed / labor force

unemployed people are people who

• without work during a reference period (usually 4 weeks)

• were available for work

• were seeking work

employment rate

shows proportion of pop of working aged that are in paid work or self-employed

= employed / pop of working age

what is different about how we calculate employment rate vs. unemployment rate??

denominator for employment = pop of working age and unemployment denominator = labor force —> two countries can have same unemployment but very different employment rates