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Measuring Unemployment
A Working Definition of Unemployment
People able, available and willing to find work and actively seeking work but not employed
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13 12 11 10 9 8 7 6 5 4 3 2 1 0 90
Claimant Count
13 12 11 10 9 8 7 6 5 4 3 2 1 0 06 08 10
Source: Labour Force Statistics
92
94
96
98
00
02
04
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Types of Unemployment
Seasonal Unemployment
Regular seasonal changes in employment / labour demand Unemployment data is usually given a seasonal adjustment to reflect this Not a major concern for labour market economists Affects certain industries more than others
Catering and leisure Construction Retailing Tourism Agriculture
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Types of Unemployment
Frictional Unemployment Irreducible minimum unemployment in a dynamic economy Often involves short spells of unemployment Includes new and returning entrants into the labour market Imperfect information about available jobs can lengthen the period of job search Some frictional unemployment is useful a pool of available workers, can help to keep wage inflation down
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Structural Unemployment
Labour market failure Mismatch of skills as pattern of labour demand in the economy changes over time Involuntary unemployment Factor immobility of labour is a major cause of structural unemployment labour market failure Often involves long-term long term unemployment Prevalent in regions where industries go into long-term decline and have been major sources of employment Labour market disincentives poverty trap
Cyclical unemployment
Cyclical (Keynesian) Unemployment There is a clear cyclical relationship between demand output demand, output, employment and unemployment Caused by a fall in aggregate demand relative to potential GDP leading to a loss of real national output and employment If national output grows less than potential output then a slowdown in demand is nearly always enough to create some more cyclical unemployment
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10.0 7.5
Percentage growth of GDP Unemployment (% of the labour force, LFS)
10.0 7.5
Per cent of the labour force millions
1.5 1.3
O t of Out f work kf for l less than th 6 months th
1.1 0.9 4 2 0
Pe ercent
0
Annual growth of real GDP
-2 2 -4 -6 Q1 Q3 05 Q1 Q3 06 Q1 Q3 07 Q1 Q3 08 Q1 Q3 09 Q1 Q3 10
-2 2 -4 -6
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Consequences of unemployment
Economic and social impact of high unemployment
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Thousands, people out of work for at least a year aged 18-24 275000 250000 225000 200000 175000 150000 125000 100000 75000 50000 25000 0 92 94 96 98 00 02 04 06 08 10
Source: Reuters EcoWin
275000 250000 225000 200000 175000 150000 125000 100000 75000 50000 25000 0
10
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11
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12
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Increased burden on the welfare state which may require higher taxes crowding-out effect on private sector businesses and individuals
13
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Trends in UK unemployment
Developments in the UK labour market
14
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Unemployment by Gender
Per cent of the labour force, source: Office of National Statistics
14 13 12 11 10 9
GBP
14 13 12 11 10 9 8 7 6 5 4 3 2 1
8 7 6 5 4 3 2 1 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Claimant count rate - all - % Claimant count rate % : Males Claimant count rate % : Females
15
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Unemployment Expectations Expectations of unemployment Net % balance of people expecting higher unemployment in the next year
80 70 60
Net balance
80 70 60 50 40 30 20 10 05 06 07 08 09 10
Source: Reuters EcoWin
50 40 30 20 10
11 10 9 8 7
UK unemployment rate
9 8 7 6 5 4 99 00 01 02 03 04 05 06 07 08 09 10 11
6 5 4
16
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15 0 15.0
15 0 15.0
PERCENT
12.5 UK
12.5
10.0
10.0
7.5
7.5
5.0
5.0
2.5 80 82 Spain 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
2.5
United Kingdom
Source: Reuters EcoWin
17
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18
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Tutor2u
Keepuptodatewitheconomics, resources,quizzesand worksheetsforyoureconomics course.
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Revision Workshops
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