Key Indicators in the Economy

Unemployment rate
 What is Employed?
Any person 16 years old or older who:

(a) Works for PAY, either for someone else

or in his/her own business for one or more
hours per week
(b) Works WITHOUT PAY for 15 or more
hours per week in a FAMILY ENTERPRISE
(c) Has a JOB but has been TEMPORARILY
absent, with or without pay
unemployment & Labor Force
Unemployed:
A person 16 years old or older who is NOT
WORKING, is AVAILABLE for work and has made
SPECIFIC EFFORTS to find work during the
previous FOUR WEEKS.

NOT IN THE LABOR FORCE (NLF)

People who are NOT LOOKING for work either
because they do not want a job or because they
have given up looking
unemployment & Labor Force
LABOR FORCE:
The NUMBER of PEOPLE employed plus the
number of unemployed
What is unemployment?
Unemployment is a key economic
indicator because it signals the
ability (or inability) of workers to
obtain gainful work and contribute to
the productive output of the
economy.
More unemployed workers mean
less total economic production.
That is why, Unemployment is
considered to be a key measure of
the health of the economy.
TYPES OF unemployment
Frictional Unemployment
is a type of unemployment where
people voluntarily change jobs. For
example, an individual chooses to go to
another company and graduate looking
for a job. Generally, it is a short-term
unemployment.

o
TYPES OF unemployment
Structural Unemployment
is a type of unemployment where there
is a technological change in the
economy's structure in which labor
markets operate. For example, transition
of using horses to automated vehicles
for transportation.
TYPES OF unemployment
Cyclical Unemployment
is a type of unemployment where there is a
variation in the number of unemployed
workers during economic upturns and
downturns. For example, people are laid off
due to an economic recessions, or huge
increases in oil prices.

o
TYPES OF unemployment
TYPES OF unemployment
TYPES OF unemployment
Institutional Unemployment
is a type of unemployment where
institutional unemployment results from
long-term or permanent institutional
factors and incentives in the economy. For
example, the government increases the
minimum wage, which forces businesses
to hire fewer workers.
 Key Indicators in the Economy

REASONS FOR
UNEMPLOYMENT
REASONS For unemployment
1. Job Search
is the process of FITTING
employees, based on their
interests and abilities, with
suitable professions.
REASONS For unemployment
Sectoral Change
Workers need time to look for
jobs in the new sectors due to
shifts in the demand mix across
industries or regions.
REASONS For unemployment
2. Minimum Wage Laws
Matters most to the least experienced and
experienced workers in the labor force. When
wages are higher than the level of equilibrium,
more labor is supplied than is required, and
workers are unemployed as a result of waiting
for opportunities to present themselves.
REASONS For unemployment
REASONS For unemployment
3. Union and Collective Bargaining
Union - a labor union that negotiates pay,
benefits, and working conditions with
businesses
Collective Bargaining - process by which
unions and firms agree on the terms of
employment
REASONS For unemployment
4. Theory of Efficient Labor
Because businesses function more effectively
when salaries are higher than the equilibrium
level, it may be advantageous for businesses
to maintain high wages even when there is a
labor excess.
 Key Indicators in the Economy

DIMENSIONS OF THE
UNEMPLOYMENT PROBLEM
DIMENSIONS OF unemployment

1. Educated Unemployment
2. Self-Employment
3. Women and Employment
4. Youth Unemployment and
Child Labor
 Key Indicators in the Economy

FORMS OF UNDERUTILIZATION
OF LABOR
FORMS OF UNDERUTILIZATION OF LABOR
1. Open Unemployment
2. Underemployment
3. Visible Active but Underutilized
a. Disguised underemployment
b. Hidden underemployment
c. Premature retirement
4. The Impaired
5. The Unproductive
 Key Indicators in the Economy

ECONOMIC MODELS OF
EMPLOYMENT
DETERMINATION
 ECONOMIC MODELS
1. Traditional Competitive
Free Market
Producers demand more workers as long as
the value of the marginal product produced
by an additional worker exceeds their cost or
wage rate - meaning, more workers will be
hired only at lower wage rates.
 ECONOMIC MODELS
2. Output-Employment Macro
Model
Focuses on the connection between
creating jobs, industrial production
growth, and capital accumulation.
 ECONOMIC MODELS
3. Price-Incentive Micro Model
takes into account how distorted factor
prices affect resource usage,
particularly labor utilization. Adopt
policies aimed at raising the demand for
labor.
 ECONOMIC MODELS

4. Rural-Urban Migration Model

Pay attention to the two-sector labor

transfer as factors that affect supply
and demand.
 Key Indicators in the Economy

Unemployment rate
COMPUTATION
 Important note:
According to Mankiw:

The unemployment category includes those who

were not employed, were available for work, and
had tried to find employment during the previous
four weeks. It also includes those waiting to be
recalled to a job from which they had been laid off.
 Important note:
In the Philippines:

In the Labor Force or Economically Active Population

refers to persons 15 years old and over who are
either employed or unemployed.
DEFINITION OF TERMS (PSA, 2021)
Employed
Include all persons 15 years old and over as of their last birthday and during
the basic survey reference period are reported as either:
a. At work. Those who do any work even for one hour during the reference period
for pay or profit, or work without pay on the farm or business enterprise operated
by a member of the same household related by blood, marriage, or adoption; OR

b. With a job but not at work. Those who have a job or business but are not at
work because of temporary illness/injury, vacation, or other reasons. Likewise,
persons who expect to report for work or to start operation of a farm or business
enterprise within two weeks from the date of the enumerator's visit, are
considered employed.
DEFINITION OF TERMS (PSA, 2021)
Underemployed

Refers to employed persons who expressed the desire to have additional

hours of work in their present job, or to have additional job, or to have a new
job with longer working hours during the reference week.

Visibly Underemployed

Refers to employed persons who worked less than 40 hours and wanted
additional hours of work during the reference week.
DEFINITION OF TERMS (PSA, 2021)
Unemployed
Include all persons who are 15 years old and over as of their last birthday and are
reported as:
a. without work, AND currently available for work, i.e., were available and willing to take
up work in paid employment or self employment during the basic survey reference
period;

b. AND seeking work, i.e., had taken specific steps to look for a job or establish a
business during the basic survey reference period;

c. OR not seeking work due to the following reasons: tired/believe no work available,
awaiting results of previous job application; temporary illness/disability; (d) bad weather;
and (e) waiting for rehire/job recall.
DEFINITION OF TERMS (PSA)
Persons Not in the Labor Force

Persons 15 years old and over who are neither employed nor unemployed
according to the definitions mentioned. Those not in the labor force are persons
who are not looking for work because of reasons such as housekeeping,
schooling, and permanent disability. Examples are housewives, students,
persons with disability, or retired persons.
FORMULA
 Examples:
PSA September 2023 Labor Force Survey
Number of Persons in the Labor Force:
49.93 Million
Number of Employed Persons:
47.67 Million
Number of Unemployed Persons:
2.26 Million
 Examples:
Unemployment Rate = (2.26 Million/49.93 Million) x 100

=0.0452633687162027 x 100
=4.526336871620268
=4.5%

Therefore, the unemployment rate of the Philippines in

September 2023 is 4.5 %.
 IMPORTANT FORMULAS:

Labor Force = Number of employed + Number of unemployed

IMPORTANT FORMULAS:
 Key Indicators in the Economy

ECONOMIC IMPLICATIONS
OF UNEMPLOYMENT RATE
Signs of Economic distress
An economy with high unemployment
has lower output without a proportional
decline in the need for basic
consumption.
High, persistent unemployment can
signal serious distress in an economy and
even lead to social and political upheaval.
OVERHEATED ECONOMY
A low unemployment rate, on the other hand,
means that the economy is more likely to be
producing near its full capacity, maximizing
output, driving wage growth, and raising living
standards over time.
 Standard of living
Standard of living refers to the quantity and quality of
material goods and services available to a given
population, which can also explore factors such as
economic and political stability, political and religious
freedom, environmental quality, climate, and safety.
 OVerheated economy
An overheated economy is one that has
experienced a prolonged period of good economic
growth and activity that has led to high levels of
inflation, triggered by increased consumer wealth.
 OVerheated economy
Rising Rates of Inflation

As a result, governments and central banks will

usually raise interest rates in an attempt to lower
the amount of spending and borrowing.
Examples
Low Unemployment Rate:
In February 2020, the U.S. reached its lowest
unemployment rate of 3.5% since the 2008
financial crisis. Economists say that this is too low.
A low unemployment rate shows that the
country's market is overusing its resources and
becoming inefficient. This could lead to an
economic recession similar to the 1969 U.S.
economic expansion where the unemployment
rate rose from 3% to 6%.'
Examples
High Unemployment Rate:
The country with the highest unemployment rate is
South Africa, with a 33.5% measurement at the end of
2022. Economic growth was severely affected by the
COVID-19 pandemic, reaching -6.0% in 2020. There
has been some growth, but it declined again in 2022,
where it showed a 1.9% measurement of economic
growth. The market is not providing enough labor for
the population, affecting the average income of
families, weakening purchasing power, and increasing
relative poverty.
elements used