ACCTG 211 1st Edition Lecture 8 Outline of Last Lecture II Real vs Nominal GDP III Gross Domestic Product IV Product approach V Example of Percent Change REAL from previous year VI Example of how to Calculate GDP deflator Outline of Current Lecture I Unemployment II How is unemployment Calculated III How did the Great Recession happen IV Types of Unemployment Current Lecture I II Unemployment a In January it is expected there was 234k jobs created i Just an estimate the official data is not released yet b In December there were 252k jobs created c In a better economic time the number should be around 350k 400k d The unemployment rate is currently 5 6 e Near 2010 the unemployment was around 10 i GDP plummeted at the same time 1 Real GDP growth fell to 4 f Low skilled teenagers have the greatest unemployment rate out of High school graduates and graduated college students during the great recession i Teenagers U 25 ii HS degrees U 11 iii Because they don t have the right skill set How is unemployment calculated a Unemployed 16 years or older do not have a job and looking for work These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute III IV i If you are not looking for work you are not counted 1 Retired disabled a full time student b Employed if a person works at least one hour per week for pay i These people are counted as employed ii Underestimates the unemployment rate c Labor Force unemployed employed d Discouraged workers available for work but have not looked for a job during the past month i Problem with the unemployment rate ii Underestimates the unemployment rate e Unemployment Rate Number Unemployed Labor Force X100 How did the Great Recession happen a The housing market collapsed i People would buy houses just to flip them b The financial system imploded c Interest rates were high i When the equity in your house plummets you don t have that live equity anymore d Firms cut production and laid off workers i Stock market plummeted 1 Everyone sells because of a crisis in confidence e Policy makers stepped in and created government stimulus and reduction in interest rates i Trying to restore confidence and encourage spending 1 Because of double dip employers still may not hire a Double dip the market will shoot right back down again 2 Businesses are cautious about hiring 3 Population keeps growing Types of unemployment a Cyclical Unemployment Unemployment is unemployment caused by recession i The type of unemployment we are talking about b Structural Unemployment Arises from mismatch of skills of workers out of work and the skills required for existing jobs 1 Lasts for a longer time than cyclical unemployment 2 Could possibly be fixed by the government supporting payments for education ii Demand is low iii Do not have a right skill set iv New technology 1 McDonalds workers are now robots v Globalization 1 Outsourcing and offshoring 2 Hard to compete with global production prices vi Lack of education vii Shifts in government priorities c Frictional Unemployment caused by the normal search time for workers with marketable skills to find work i Frictional Unemployment is temporary ii EX college graduates people changing jobs seasonal workers iii Workers have marketable skills and are either 1 Changing jobs I quit 2 Initially entering the work force 3 Re entering the work force 4 Seasonally unemployed a EX Ski instructors 5 Between jobs a EX consulting firms iv In general the causes of frictional unemployment are 1 Normal transition to new job or lack of information in finding a new job d Unemployment is never zero i Structural unemployment and frictional unemployment will always exist e Unemployment rate does not reflect i Number of discouraged workers ii Workers who are working part time who would like to work full time