A ski instructor out of work every July is unemployed. A retiree who skis every Tuesday is not. This week: who counts, and how joblessness reaches your lift line.
Learning objectives. After this week you can (1) compute the unemployment rate; (2) name the four types of unemployment; and (3) explain how unemployment reaches a resort's visits.
Remember this: the unemployment rate divides by the labor force, not the population. People not looking for work are not in the labor force.
1) Who counts
The labor force is everyone employed plus everyone actively seeking work. Full-time students not seeking work, retirees, and discouraged workers who have stopped looking are not in it.
Unemployment Rate = Unemployed ÷ Labor Force × 100
Labor force 200 with 10 unemployed: 10 ÷ 200 = 5%. Labor force 250 with 235 employed means 15 unemployed: 15 ÷ 250 = 6%.
2) Four kinds of unemployment
- Frictional: between jobs and searching. Normal and healthy.
- Structural: workers' skills don't match the jobs on offer.
- Cyclical: caused by recessions; it rises when the economy contracts.
- Seasonal: tied to the calendar, like the instructor idle all summer.
Full employment still includes some frictional and structural unemployment. It never means zero.
3) Unemployment and wages
When unemployment is low, workers are scarce and employers compete for them, so wages tend to rise. When it is high, that pressure eases. One trap: a discouraged worker who stops looking leaves the labor force, which can make the rate fall even though nobody found a job.
4) Where it shows up at your resort
The Macro environment line on your Daily Report prints the economy's unemployment rate. The report itself says demand moves with unemployment: more people out of work means fewer paychecks and fewer lift tickets. Your own staffing costs move with inflation and with the wage choices on your decision form (and, where an Extrapoli Daily panel appears, its Labor index), so look for unemployment in your visits, not your wage bill. Weather and events move visits too, so compare days that looked alike.
Quick self-check
(a) Labor force 400, unemployed 20. The rate? (b) A worker laid off in a recession is which type? (c) Unemployment goes from 4.5% to 5.1%. By how many percentage points did it rise? (Answers: 20 ÷ 400 = 5%; cyclical; 0.6 points.)
Common mistakes
- Dividing by the population. The denominator is the labor force.
- Counting students and retirees as unemployed. If they are not looking, they are not in the labor force.
- Expecting full employment to mean zero. Some frictional and structural unemployment always remains.
This week in the arena
Read the unemployment rate on two of this week's reports, and note your visits and the weather on each of those days. If unemployment moved, did your visits move with it, or did something else explain the difference?