Lecture 8

• Working-age population

  • In the U.S., refers to the total number of people aged 16 years and over who are not in jail, hospital, or some other form of institutional care or in the U.S. Armed Forces
  • In Hong Kong, refers to the total land-based non-institutional population aged 15 and over
• Labor force

  The number of people employed plus the number unemployed
• Population Survey Criteria

  • Employed population
  • Unemployed Population
• Employed population

  Comprises all persons aged 15 and over who have been engaged in performing work for pay or profit during the 7 days before enumeration or have formal job attachment
• Unemployed Population

  Comprises all persons aged 15 and over who: a) have not had a job and have not performed any work for pay or profit during the 7 days before enumeration; and b) have been available for work during the 7 days before enumeration; and c) have sought work during the 30 days before enumeration
• The data for Hong Kong (11/2023 - 01/2024)
• Unemployment rate

  The percentage of people in the labor force who are unemployed
• In Jan 2024, the unemployment rate in HK was 2.8%
• Labor force participation rate

  The percentage of the working-age population who are members of the labor force

  
• In Jan 2024, the labor force participation rate was 57.3%

  
• Marginally attached worker

  A person who does not have a job, is available and willing to work, has not made specific efforts to find a job within the previous four weeks, but has looked for work sometime in the recent past
• Discouraged worker

  A marginally attached worker who has not made specific efforts to find a job within the previous four weeks because previous unsuccessful attempts were discouraging
• Alternative Measures of Unemployment

  • U-1
  • U-2
  • U-3
  • U-4
  • U-5
  • U-6
• The official measure of unemployment does not include marginally attached workers and people who work part time for economic reasons
• Frictional unemployment

  The unemployment that arises from normal labor turnover—from people entering and leaving the labor force and from the ongoing creation and destruction of jobs
• Frictional unemployment

  • A graduate interviewing for his first job
• Structural unemployment

  The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs
• Structural unemployment

  • When banks introduced the automatic teller machine in the 1970s, many bank-teller jobs were destroyed
• Cyclical unemployment

  The fluctuating unemployment over the business cycle that increases during a recession and decreases during an expansion

  
• Cyclical unemployment

  • During the recession of 2008–2009, many workers were laid off as business activity declined
• Natural unemployment

  The unemployment that arises from frictions and structural change when there is no cyclical unemployment—when all the unemployment is frictional and structural
• Natural unemployment rate

  The natural unemployment as a percentage of the labor force

  
• Full employment

  Occurs when the unemployment rate equals the natural unemployment rate

  
• At full employment, all the unemployment is frictional or structural—and not cyclical unemployment
• Major influences on natural unemployment

  • Age distribution of the population
  • The pace of structural change
  • The real wage rate
  • Unemployment benefits

  
• Potential GDP

  The value of real GDP when the economy is at full employment
• When the unemployment rate is above the natural rate

  Real GDP is below potential GDP

  
• When the unemployment rate is below the natural unemployment rate

  Real GDP is above potential GDP

  
• Output gap

  Equals real GDP minus potential GDP, expressed as a percentage of potential GDP
• When the economy is at full employment, real GDP equals potential GDP and there is no output gap
• When the unemployment rate is above the natural rate

  The output gap is negative

  
• When the unemployment rate is below the natural unemployment rate

  The output gap is positive

  
• During a recession, the unemployment rate exceeds the natural unemployment rate and the output gap is negative