Unemployment

Macroeconomic Theory I

ECON222

Fall 2017

Macroeconomic Theory I (ECON222) Production & Employment Fall 2017 1 / 14

Employment states

Employed: worked during the past week

Unemployed: did not work during the past week, but actively sought
work in the previous four weeks

Not in the labour force: did not work during the past week and did
not look for work during the past four weeks

The labour force is all employed and unemployed workers.

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Rates and ratios

Unemployment rate: fraction of labour force that is unemployed.

(' 7%)

Participation rate: fraction of the labour force in the working-age

population (' 66%)

Employment ratio: fraction of the employed in the working-age

population. (' 62%)

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 Canadian Unemployment Rate
14

12

10

8
% of Labour
Force
6

0
1975 1980 1985 1990 1995 2000 2005 2010 2015
Year
Changes in unemployment status

The labour market is in a constant state of ux: workers lose and nd

jobs continuously

About 60% of unemployed stay unemployed each month

Some become discouraged workers and stop searching.

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Macroeconomic Theory I (ECON222) Production & Employment Fall 2017 6 / 14
How long are people unemployed?

An unemployment spell: is the length of time that an individual is

constantly unemployed

Most unemployment spells are of short duration: 2 months or less.

Most people who are unemployed on a given date are long-term

unemployed

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Macroeconomic Theory I (ECON222) Production & Employment Fall 2017 8 / 14
Types of unemployment

Frictional unemployment: due to search and matching

,! takes time for workers and rms to nd each other

Structural unemployment: long-term and chronic

,! unskilled or low skilled workers are unable to nd long-term jobs
,! reallocation of labour due to ongoing technological change

Macroeconomic Theory I (ECON222) Production & Employment Fall 2017 9 / 14

Cyclical unemployment

The natural rate of unemployment (u): rate that prevails when

economy is at full-employment level
,! due to frictional and structural causes

Cyclical unemployment: the dierence between the actual and

natural unemployment rates

u u

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Who is unemployed?

Unemployment rates are higher amongst

,! males
,! the young
,! the less educated

Macroeconomic Theory I (ECON222) Production & Employment Fall 2017 11 / 14

 Unemployment Rate by Gender
14

12
Male
Female
10

8
% of Labour
force group
6

0
1975 1980 1985 1990 1995 2000 2005 2010 2015
Year
 Unemployment Rate by Age Group
25

15 to 24 years

25 to 54 years
20
55 to 64 years

15

% of Labour
force group
10

0
1975 1980 1985 1990 1995 2000 2005 2010 2015
Year
 Unemployment Rate by Education Level
20
Some high school
High school graduate
18
Postsecondary certificate or diploma
Bachelor's degree
16 Above bachelor's degree

14

12

% of Labour
10
Force Group
8

0
1990 1995 2000 2005 2010 2015
Year