What is Unemployment?

Learning Goals/Objectives:

• Define the labor force as all persons who are employed or unemployed in accordance with the Bureau of Labor Statistics definitions.

• Define unemployed as persons aged 16 years and older who had no employment during the specified period (reference week) of the BLS employment survey and were actively seeking employment.

• Given labor force and unemployment data, calculate the unemployment rate.

Overview:

Students will regularly hear or read reports about the rate of unemployment in the United States or their state. The rate of unemployment directly impacts employment opportunities and potential income. Students should understand the basic terminology related to the unemployment reports in the news and how the unemployment rate is determined in order to understand how it may impact them.

Activities:

1. Ask what does it mean to be unemployed? Elicit student responses. Students will typically refer to people who do not have a job.

2. Explain that defining something like unemployment is not as simple as it may seem. Refer to the Bureau of Labor Statistics (BLS) definition of “unemployed person.” Handout 1 provides the definitions of key labor market terminology.

Unemployed persons: Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed.

3. Explain that the BLS conducts a monthly survey of households to determine how many persons in that household worked and who did not work during a designated week each month. The BLS will only count those who are counted in the “labor force,” that is, those working or those who are unemployed and looking for work. Persons not seeking employment (retired, under age 16, not able or not wanting to work, or having given up looking for work). Those in the military or institutionalized are not counted.

4. Explain the formula for determining the unemployment rate: The number of unemployed as a percentage of the labor force.

Example: Size of the labor force: 1,000,000 persons

Number of unemployed 50,000 persons

50,000 divided by 1,000,000 = .05 pr 5%

5. Provide the class with the current labor market data. Use the data below or data form the most recent month’s employment report. For the most recent month’s labor force, and unemployment numbers, go to this BLS web page: http://www.bls.gov/news.release/empsit.a.htm

April, 2010 Employment Data:

Civilian labor force: 154,715,000

Number employed: 139,455,000

Number unemployed 15,260,000

Answer: 15,260,000 divided by 154,715,000 = 0.099

Expressed as a percentage, the unemployment rate in April, 2010 is 9.9 %

5. Explain that there are a few additional persons no counted as unemployed, including:

“Those who “worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family; and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor- management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs.”

6. What does the unemployment rate mean? Ask students if the unemployment rate matters to them. NOTE: Avoid discussion of students’ personal stories if their parents are unemployed.

7. Remind the students that if they are under age 16 or not seeking employment, they are not unemployed, even if they are not working. If they are over age 16 and looking for a job (even if they are full-time students), they are considered to be unemployed.

8. Distribute Handout 2, Employment and Unemployment Scenarios. In small groups or as a class, discuss each scenario to determine the person’s status according to the BLS definitions.

Review the students’ or groups’ answers by identifying the key parts of the BLS definitions.

Answers to Handout 2:

a. Bob: Bob is unemployed because he is not working and he is looking for employment.

b. Maria: Even though she is looking for a better job, Maria is not unemployed because she worked at least one hour for pay.

c. Jose: Jose has stopped looking for work . If he did not look for work in the previous week, he is not counted as part of the labor force and is not counted as unemployed.

d. Frank: Frank is to young (under 16) to be counted as part of the labor force and cannot be counted as unemployed.

e. Susan: Susan is not employed and not unemployed. Volunteer work does not count as employment and she is not looking for a job.

f. Pat: Even though Pat may be working next month, she is not working at this time. She is unemployed.

9. Review the definitions of labor force, employment and unemployment.

10. Ask: What does this mean to you? Elicit student responses about their understanding of the impact of unemployment. Ask: What are the other effects of unemployment?

Loss of jobs means loss of incomes.

Loss of incomes means less consumption.

Less consumption means less demand for goods and services.

Less demand means businesses are less likely to hire and invest.

Materials:

Handout 1

Labor Market Definitions

Reference: U.S. Bureau of Labor Statistics Glossary

Link: http://www.bls.gov/bls/glossary.htm#U

Labor force: The labor force includes all persons classified as employed or unemployed in accordance with the definitions contained in this glossary. The BLS counts only civilians – not military, and does not count those who are institutionalized (in prison, mental hospitals, etc.)

Employed persons: Persons 16 years and over in the civilian non-institutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees; worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family; and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs. Each employed person is counted only once, even if he or she holds more than one job. Excluded are persons whose only activity consisted of work around their own house (painting, repairing, or own home housework) or volunteer work for religious, charitable, and other organizations.

Unemployment rate: The unemployment rate represents the number unemployed as a percent of the labor force.

Handout 2

Employment and Unemployment Scenarios

Read the short description of each person. Determine if each person is unemployed, unemployed, or neither, according to the BLS definitions.

a. Bob worked for the XYZ Manufacturing Company for six year until he was laid off when the firm closed his factory. He registered for unemployment compensation, and he has been sending out resumes and competing applications each week since that time. Is Bob employed or unemployed?

b. Maria works just five hours a week at a convenience store while she looks for a job as a secretary. She wants to work full time, but she also has to take care of her three children. Is Maria employed or unemployed?

c. Jose has been out of work for over four months. He has had no luck finding a new job because the businesses in his town are all reducing their employment. He became so frustrated that he has not even looked for a job in the past month. Is Jose employed or unemployed?

d. Frank is fifteen and has dropped out of school. He is looking for a job so that he can move out of his parent's house and live on his own. Someday, he wants to be an electrician, but his school did not have a vocational program. Is Frank employed or unemployed?

e. Susan works as a volunteer twenty hours a week for a church food pantry. She previously worked at an insurance company until she was laid off. At this time, she is not looking for another job. Is Susan employed or unemployed?

f. Pat’s company put 50 people on a temporary furlough (temporarily laid off) and has promised to recall them to work next month. In the mean time, she has been working at home making scarves that she sells at the flea market. Is Pat employed or unemployed?

Assessment:

• Give the students current labor force and unemployment numbers and ask them to determine the unemployment rate.

Download:

Lesson 25 What is Unemployment.doc