A person without a job who is available to work and has been actively searching for one is counted as unemployed.
Missing Word
unemployed
Unemployed people are jobless, available and actively looking for work. People without jobs who are not searching are counted as out of the labor force instead.
Category: Measuring Unemployment
Question 2
A person with no job who is available to work is counted in the labor force, rather than outside it, only after an active job search at some point in the previous 4 weeks.
Missing Word
4
The official test for unemployment requires an active job search, such as applying or interviewing, within the previous 4 weeks. A jobless person who has not searched in that time is counted as out of the labor force, not as unemployed.
Category: Measuring Unemployment
Question 3
Official U.S. labor statistics include only people aged 16 and older when they measure the labor force.
Missing Word
16
The adult population in U.S. labor statistics is people aged 16 and older. Younger people are not counted as employed, unemployed or out of the labor force.
Category: Measuring Unemployment
Question 4
The labor force participation rate equals the labor force divided by the adult population, times 100.
Missing Word
population
The participation rate shows what share of the adult population is either working or looking for work. Its denominator is the adult population, while the unemployment rate divides by the labor force instead.
Category: Labor Force Calculations
Question 5
Holding a job that does not use a worker's training, such as a finance graduate working as a sales clerk, is called underemployment.
Missing Word
underemployment
Underemployment is a form of hidden unemployment. Underemployed workers are counted as employed, so the official unemployment rate does not capture their lost potential.
Category: Measuring Unemployment
Question 6
Official U.S. labor statistics sort every adult into one of 3 groups: people with jobs, jobless people who are looking for work, and people out of the labor force.
Missing Word
3
The adult population is divided into the employed, the unemployed and those out of the labor force. Only the first two groups make up the labor force, which is why someone without a job is not automatically counted as unemployed.
Category: Measuring Unemployment
Question 7
In the short run the supply of labor changes little, so cyclical unemployment comes mainly from shifts in the demand for labor.
Missing Word
demand
Firms want fewer workers when they expect weaker sales, so the demand for labor shifts left in a recession. With sticky wages, that shift shows up as unemployment rather than lower pay.
Category: Sticky Wages
Question 8
In one theory of sticky wages, the experienced current employees who train new hires and keep operations running are called insiders.
Missing Word
insiders
Insiders are current employees whose knowledge the firm depends on. Cutting their pay could alienate them and hurt productivity, so firms are reluctant to cut wages.
Category: Sticky Wages
Question 9
An implicit contract works like insurance, since workers give up some pay in good times in return for protection from pay cuts in bad times.
Missing Word
insurance
Insurance means paying a cost in good times to be protected from losses in bad times. Under an implicit contract, workers accept modest raises in booms so that employers keep wages steady in downturns.
Category: Sticky Wages
Question 10
If wages were fully flexible and employers wanted fewer workers, the wage would fall until the labor market reached an equilibrium, where the quantity of labor supplied equals the quantity demanded.
Missing Word
equilibrium
Equilibrium is the wage and quantity at which the number of people willing to work equals the number firms want to hire. If wages fell freely to it, everyone willing to work at that wage would find a job, which is why economists look to sticky wages to explain unemployment.
Category: Sticky Wages
Question 11
Wage agreements negotiated by unions on behalf of their members can keep pay from falling, but they cover only a small share of U.S. workers.
Missing Word
unions
Unions bargain with employers over pay for their members. Because union contracts and minimum wage laws cover only a modest share of workers, economists look to other theories to explain why wages are sticky.
Category: Sticky Wages
Question 12
Over time wages are set by productivity, the value of output per hour of work, so an unexpected change in its growth can shift the natural rate for several years.
Missing Word
productivity
Productivity is output per unit of labor. Because pay adjusts slowly, a surprise slowdown in productivity growth raises unemployment for a time, and a surprise speedup lowers it.
Category: Natural Rate
Question 13
When firms expect a recession, they want fewer workers at every wage, so on a labor market graph the curve showing how many workers firms want to hire shifts to the left.
Missing Word
left
Firms base hiring on expected sales, so an expected slowdown shifts the demand curve for labor to the left. With wages sticky downward, the drop shows up as fewer jobs and higher cyclical unemployment rather than lower pay.
Category: Cyclical Unemployment
Question 14
Surprisingly fast growth in output per hour, with pay catching up only slowly, makes extra workers more valuable to firms, so the curve for the number of workers firms want to hire moves to the right and joblessness drops for a time.
Missing Word
right
Higher productivity raises the value of what each worker produces, which shifts labor demand to the right. Because wages adjust slowly, firms hire more at the going wage and unemployment falls for several years, as it did in the late 1990s, until pay catches up.
Category: Natural Rate
Question 15
The natural rate of unemployment combines 2 kinds of unemployment: the kind caused by the time it takes to move between jobs and the kind caused by a mismatch between workers' skills and employers' needs.
Missing Word
2
The natural rate is the sum of frictional unemployment, from the time spent searching and switching jobs, and structural unemployment, from skills that do not match what employers want. Cyclical unemployment is not part of it, because it comes from recessions.
Category: Natural Rate