Labor Market

People in the labor market is

classified as
 Employed

 Unemployed

 Out of the labor

People in the labor market is
classified as
 Employed
 are persons 15 years old and over who,
during the reference week, were reported at
work for at least an hour
 Unemployed
 are persons 15 years old and over without
work or had no job/business, looking or
seeking work, and available for work during
the reference week.
People in the labor market is
classified as
 Out of the labor force
 are persons 15 years old and over who are
neither employed nor unemployed.
 e.g. students, retirees, people with
responsibilities/illness that keeps them at
home, those who are well-off financially that
they need not work
Labor Force
 Population 15 years old and over who are
either employed or unemployed.

 Labor force = employed + unemployed

Unemployment Rate

Labor Force Participation Rate

Types of Unemployment
 Frictional Unemployment

 Cyclical Unemployment

 Structural Unemployment
Types of Unemployment
 Frictional Unemployment
 unemployment that is due to the normal
working of the labor market
 happens when people are between jobs
 a voluntary unemployment
 the case of an individual who may have left a
job in one city, is moving to another city, and
there is a job awaiting her
Types of Unemployment
 Cyclical Unemployment
 unemployment caused by deficient economic
activity
 involuntary unemployment that is closely
associated with the overall economic situation
and perspectives
 this is the part of unemployment that can be
affected by policies related to the level of
economic activity in the short run
Types of Unemployment
 Structural Unemployment
 occurs when there is generally a mismatch –
a mismatch of the skills that an individual has
with those that are in demand in the current
economy
 involuntary unemployment
Natural Rate of Unemployment
 Is the unemployment rate that will occur
when we essentially have full employment
– when we have no cyclical
unemployment. With no cyclical
unemployment, we basically just have
frictional unemployment and some of the
very hard to employ then we are at natural
rate of unemployment.
Unemployment Rate
 The unemployment rate omits and misses
some individuals who are not having
satisfactory labor market experiences
 It does not capture the extent of
underemployment
 Misses the discouraged workers
Underemployment
 Underemployed – employed persons who
want additional hours of work in their
present job, or to have additional job, or to
have a new job with longer working hours
Underemployment
 Two types of underemployment
 Time – an individual who might be working
part time a week who would prefer to work full
time
 Skill – when an individual who has high skills
is working in a job that does not require that
type of skill
Underemployment
 Visibly underemployed –underemployed
persons who worked for less than 40
hours during the reference week
 Invisibly underemployed – underemployed
persons who worked for 40 hours or more
during the reference week.
Discouraged workers
 Those people who are not looking any
longer for work; they had looked
(technically they were unemployed in a
point) but discouraged and stopped
looking for work.