CHAPTER 6: Growth, Unemployment, and Inflation

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CHAPTER 6Growth,Unemployment, and Inflation
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Unemployment

• Labour Force Canadians of working age (15)
  either- employed, OR - unemployed, available
  for and seeking work.
• Labour Force Survey - monthly survey of labour
  market in Canada.- important measure of economic
  conditions.

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Unemployment

• EMPLOYED
• did any paid work at all
• had a job but not at work due to
• vacation
• illness or disability
• personal or family responsibilities
• bad weather
• a labour dispute

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Unemployment

• UNEMPLOYED
• was without work
• had actively looked for work in the past 4 weeks
• available for work
• had not looked for work BUT
• laid off for 26 weeks or less OR
• had a new job starting within 4 weeks AND
• available for work

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Under 15 /or institutionalized (6.0 million)
Not in labour force (8.3 million)
Employed (15.4 million)
unemployed 1.285 million
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Measuring Unemployment

• Unemployment Rate
• Percentage of the labour force that is
  unemployed
• Unemployment 1,285,000 x 100 7.7
• rate 2002 16,700,000

Unemployment unemployed x 100
rate labour force
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Unemployment in Canada1926 - 2001

• HIGHEST 20 in the 1930s
• LOWEST 1.2 during WWII

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International Unemployment1981 - 2001

• Unemployment has generally been higher in Canada
  than in Europe, US, Japan

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(No Transcript)
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Unemployment Rate

• DOES NOT MEASURE
• Hidden unemployment - people who have given up
  looking for a job- also called discouraged
  workers- estimated at 2 3 of the labour force
• Underemployment - employed at job that doesnt
  fully utilize skills- working part-time but
  would prefer full-time

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Unequal Burdens

• Occupation
• Age
• Gender
• Education
• Region

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Unemployment Rates by category - April 2006
Source Statistics Canada
15.9
11.5
10.5
9.1
8.3
8.1
6.2
5.4
4.8
4.7
4.5
3.5
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Unemployment

• Full employment
• - lowest level of unemployment that can be
  achieved without causing excessive inflation.
• - when there is no cyclical unemployment
• - at natural rate of unemployment (NRU)

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Unemployment

• GDP Gap
• The amount by which actual GDP falls short of
  potential GDP

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GDP Unemployment
Figure 6-3
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Unemployment

• Okuns Law
• For every 1 unemployment exceeds the natural
  rate.
• A GDP Gap of about 2 occurs

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Unemployment

• GDP Gap
• Example - 1992
• unemployment rate is 11.3
• natural rate is 7.5
• potential GDP is 770 billion
• What is the GDP gap?
• 11.3 ? 7.5 3.8
• 3.8 X 2 7.6 (apply Okuns Law)
• 7.6 of 770 billion 59 billion