by
ROBERT DIXON & JAMES THOMSON
APRIL 2000
Department of Economics. University of Melbourne. Melbourne Victoria 3010 Australia
ABSTRACT
This article explains how movements in the unemployment rate reflect
the relative rates of growth of employment and the labour force and are
related to the participation rate, labour productivity growth and output
growth. A framework is provided in which to analyse the determinants of
movements in the unemployment rate.
We look at the unemployment rate and its relationship to labour force
and employment growth in the next section. In section 3 we define the participation
rate and discuss how it relates to labour force growth. Then in Section
4, we consider Verdoon's Law and the relationship between output growth
and employment growth. In Section 5 we combine the results in the previous
section to determine the relationship between the unemployment rate and
output growth. Finally, in Section 6, we summarise the findings.
We begin looking at these questions by considering the way in which we measure the unemployment rate.
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