Apr 17 2007

IB – Unemployment at 4.4% Is this below the NRU?

Published by at 10:27 am under Macroeconomics,Unemployment

Jobs much stronger than expected – Apr. 6, 2007

This article has some very up to date stats on the employment situation in the US. Overall it seems the job situation is as strong as it’s been in years. Unemployment has dipped to 4.4%, the net job growth is positive, even though certain sectors have lost jobs in the last few months. Read this article, connect it to what you know about full-employment, unemployment, and other topics from Ch. 8.

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About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

8 responses so far

8 Responses to “IB – Unemployment at 4.4% Is this below the NRU?”

  1. Manonon 17 Apr 2007 at 1:33 pm

    The unemployment rate in the United States is now lower than it has ever been–4.4%. This, however, does not mean that only 4.4% of americans are out of a job, since the umeployment rate only takes into account the number of unemployed people in relation to the number of people in the labor force. At this level of unemployment, the nation is believed to be at full employment. A country is at full employment when workers are only experiencing frictional and structural unemployment (not cyclical unemployment, which is not desired)., Because the nation is now believed to be at full employment, if unemployment continues to decrease, the nation will be at 'greater than full employment' and cost-push inflation will occur.

  2. Jameson 17 Apr 2007 at 1:44 pm

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  3. Lucason 18 Apr 2007 at 9:36 pm

    In this article the NRU is decreasing because there is an increase in the number of jobs avaliable and while the growth of the population is usually able to match this growth in employment, this time the NRU is decreasing. If the uneployment rate continues to decrease, while this will increase the GDP because of the increase in the labour resource, then when 100% employment is reached then there will be a "wage war" as the firms try to steal away the labourers from other firms. Then because of this increase in wages, either there will be more structural unemployment as the firms replace the labourers with capital, or there will be a cost-push recession as the labour resource be comes more scarce and thus more costly. However, this is unlikely because as the cost-push rescession occurs, cyclical unemployment will occur, therefore increasing the NRU.

  4. Dennison 18 Apr 2007 at 10:58 pm

    Due to the recent job availabilities and increases in hourly wages, the United States has seen its unemployment level at the lowest since October 2006, at 4.4%. The hourly wages have risen 0.3% and the job openings in retail, construction, clothing, electronic, grocery, etc. markets have brought the unemployment low. Because of this the United States are supposebly working at full employment, which doesnt mean that everybody is employed, but means that there is no cyclical unemployment within the country. Cyclical unemployment exists when a person is unemployed (has no job but is in search of one) and there are no job openings. However, under full employment structural and frictional unemployment still exist.

  5. Wan Jin Parkon 19 Apr 2007 at 3:29 am

    Although unemployment rate in the USA has hit its record low, it does not mean that it is below the Natural Rate of Unemployment (NRU). Instead, 4.4% is the natural rate of unemployment, which can be observed after paying attention to Rich Yamarone's declaration that "the nation is…at full employment." By full employment, it means that only frictional and structural unemployment–which is essentially what the NRU covers–exists. Indeed, the examples given throughout the article are of these two types of unemployment. A recent college-grad looking for a job, for instance, is frictional unemployment, and a worker fired because of his obsolete skills (fired as many sectors of the economy are automatized) experiences structural unemployment. Because the article mentions nothing about cyclical unemployment, it can be safely declared that the US' NRU is indeed 4.4%, no more, no less.

  6. Danny Witterson 24 Apr 2007 at 11:19 pm

    The USA has hit a record low unemployment rate of 4.4%. Is this below the NRU? No, it clearly states in the article that "the nation is.. at full employment."

  7. Enno Zhangon 27 Apr 2007 at 1:33 pm

    The economic term "full employment" is different from what we usually think. Some unemployment is desirable because competition is needed especially in the work force. If everyone was employed, the only way to make other workers work for you is to countiuously raise wages. thus unemployment may not be a bad thing at all. Technically, the full employment point is within the PPC graph, not on the graph!

  8. Daniel Yeungon 16 May 2007 at 11:21 pm

    If it is below natural rate of unemployment, then it means that the country is experiencing over-employment which leads to inflation. However, full employment in economic terms refers only to no cyclical unemployment where frictional and structural are acceptable. Thus the 4.4% does not mean that only 4.4% of Americans are unemployed. Therefore, as the country is now believed to be at full employment, further decrease in unemployment rate would lead to over-employments.