Exercise Set 8.1
UNEMPLOYMENT

I. Objectives

• To compute the unemployment rate
• To understand productivity growth

II. Data

• Input the levels of employment and unemployment (in millions).
• Click on Gimme Unemployment! to confirm values for the labor force and unemployment rate.

III. Questions 

1. Go to the Bureau of Labor Statistics (BLS) at http://www.bls.gov/home.htm. (Opens in a new window.) Click on the Data Tools tab. Click on Top Picks in the left column. Select the relevant databases to answer the following questions.
   1. Obtain the levels of employment and unemployment for the latest month available: _____________.
      
      1. Employment level: ___________ million
      2. Unemployment level: ___________ million
   2. Compute the labor force and unemployment rate.
      
      1. Labor force: ___________ million
      2. Unemployment rate: _________ %
2. Go to "How the Government Measures Unemployment" at http://www.bls.gov/cps/cps_htgm.htm.
   
   1. In its Current Population Survey, which is conducted every month, how many households does the BLS contac?
   2. People under the age of _____ are not included in the labor force.
   3. Who, according to the BLS, is considered to be unemployed?
   4. Who are discouraged workers? Are they part of the labor force? Why?
   5. Are individuals working part-time considered to be employed or unemployed?
3. Go to http://www.bls.gov/lpc/faqs.htm for Frequently Asked Questions about Labor Productivity and Costs.
1. How does the BLS measure labor productivity?
2. The broadest measure of productivity published by the Bureau of Labor Statistics is that for the U.S. business sector. 
1. In 2010, business sector output covered about ____ % of the value of GDP. 
2. Which activities are excluded in the calculation of business sector productivity?
3. Unit labor costs represent the cost of labor needed to produce a unit of output. The BLS calculates it by dividing total labor compensation by real output. 
1. Show that the BLS formula leads to the following equation: Unit labor cost = Hourly compensation / Productivity
2. Ceteris paribus, what is the effect of rising productivity on unit labor cost?
4. In the most recent quarter (_____________), productivity grew _____% from the preceding quarter (in annual rates). You can use the BLS home page for the data.