Monitoring Jobs and Inflation

Employment and Unemployment

- Why Unemployment Is a Problem? It caused Lost Incomes and Production (lowers the
living standard in both the present and the future) and Lost Human Capital (damage’s a
person job prospect.
- Current Population Survey (CPS) make survey for working-age population (people aged
16 years and over who are not in jail, hospital, or some other form of institutional care)
and divides into labor force (employed and unemployed) and not in the labor force
(neither employed nor unemployed). Employed is a person must have either a full-time
job or a part-time job and unemployed is a person whose without work but has made
specific efforts to find a job within the previous four weeks or waiting to be called back
to a job from which he/she has been laid off or waiting to start a new job within 30 days.
- Three Labor Market Indicators:
 The Unemployment Rate: percentage of the people in the labor force who are
unemployed.
Number of people unemployed
Unemployment rate= x 100
Labor force
L abor force= Number of people employed + Number of people unemployed

 The Employment-to-Population Ratio: percentage of people of working age who

have jobs.
Number of people employed
Employment ¿ population ratio= x 100
Working−age population
 The Labor Force Participation Rate: percentage of the working-age population who
are members of the labor force
Labor force
Labor force participation rate= x 100
Working−age population
- Other Definitions of Unemployment: Marginally Attached Workers (person who
currently is neither working nor looking for work but has indicated wants and is available
for a job and has looked for work sometime in the recent past) and Part-Time Workers
Who Want Full-Time Jobs
- Most Costly Unemployment: people who remain unemployed for many weeks and
people who are unemployed because they voluntarily quit their jobs to find better ones or
because they have just entered or reentered the labor market bear some costs of
unemployment.
Unemployment and Full Employment
 - Frictional Unemployment: type of unemployment that arises when workers are searching
for new jobs or are transitioning from one job to another. It is a normal phenomenon in
economy.
- Structural Unemployment: type of unemployment that arises when occurs a mismatch
between the jobs available and the skill levels of the unemployed.
- Cyclical Unemployment: type of unemployment that arises when businesses not having
enough demand for labor to employ or it happen when the condition of economy is on
recession.
- “Natural” Unemployment: type of unemployment in the minimum unemployment rate
and exist in a growing and healthy economy. It influenced by The age distribution of the
population, The scale of structural change, The real wage rate, and Unemployment
benefits.
- Real GDP and Unemployment over the Cycle: the quantity of real GDP at full
employment is potential GDP and the gap between real GDP and potential GDP is called
the output gap.
The Price Level, Inflation, and Deflation
- Price Level = Inflation, Price Level  = Deflation
- Why Inflation and Deflation Are Problems? It caused Redistributes Income (long-term
contract employees), Redistributes Wealth (long-term contract lender or borrower),
Lowers Real GDP and Employment, and Diverts Resources from Production.
- The Consumer Price Index: measure of the average of the prices paid by urban consumers
for a fixed basket of consumer goods and services.
- The inflation rate is the percentage change in the CPI from one period to the next.
- Changes in the CPI probably overstate the inflation rate because of the bias that arises
from new goods, quality changes, commodity substitution, and outlet substitution.
- The bias in the CPI distorts private contracts and increases government outlays.
- Alternative price level measures such as the PCE deflator and GDP deflator avoid the
bias of the CPI but do not make a large difference to the measured inflation rate.
- Real economic variables are calculated by dividing nominal variables by the price level.