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This Issue in Brief

Nature and extent of frictional unemployment

Even under the best of employment conditions there will always be some unemployment arising from delays involved in changing jobs and filling job openings rather than from a lack of employment opportunity. Experience during past periods, when employment opportunities were good and labor shortages presented no serious problems, indicates that this "frictional" unemployment does not exceed 3 to 4 percent of the labor force, or an annual average of approximately 2 to 21⁄2 million. Page 1.

Trends in housing during the war and postwar periods

Current housing shortages are partially explained by wartime trends in residential construction. At the beginning of the European war, demand for emergency housing in defense areas throughout the country resulted in increased home building, which reached predepression levels and attained a wartime peak of 715,000 new units started in 1941. The next year, however, a decline set in as building materials were diverted to meet the needs of total war, and in 1944 privately financed dwellings in nonfarm areas dropped to 139,000, the lowest point since the depression. With the end of the war, in August 1945, building restrictions were lifted, resulting in an unprecedented increase in home building. From August to December 1945, private builders were issued permits for 118,000 new 1-family dwellings, compared with 115,000 new units of this type during the whole of 1944. The advance continued during the first half of 1946, when permits were issued for 319,000 new 1-family units, as against only 202,000 during the entire year of 1945. Page 11.

Inflation problems at home and abroad

Rising prices throughout the world have threatened wage earners' purchasing power and levels of living. Some countries, mainly the more highly industralized such as the United States, England, Canada, New Zealand, Sweden, and Switzerland, have kept prices from rising more than 30 to 60 percent above prewar levels. In others, including less industrialized areas such as China and Latin America which were highly dependent upon imports of manufactured goods, and even certain industrial countries such as Belgium, prices have risen to many times the prewar level. The economic forces that account for these differences, the efforts of governments to control the price system, and measures of price changes are discussed in the article on page 28.

Wage structure of the cigar manufacturing industry, January 1946

Cigar factory workers in the United States had straight-time average hourly earnings of 73 cents in January 1946. Three-fourths of all the workers were women who averaged 69 cents. Men, a larger proportion of whom were employed in higher skilled jobs, averaged 85 cents. For men, the highest average hourly earnings were $1.24 for certain types of machine adjusters, and for women, 91 cents for cigar makers, whole work, hand. The Middle Atlantic and Southeast

regions in which three-fourths of the industry's employment is located had overall averages of 73 and 75 cents, respectively. The leading cities in these regions insofar as cigar-manufacturing employment is concerned, Philadelphia and Tampa, showed averages of 72 and 86 cents, respectively. Page 45.

Labor requirements in softwood plywood production

Production of 1,000 square feet of Douglas fir plywood, the principal type of softwood plywood, required an average of about 12.4 man-hours of labor at the mill in the first half of 1946. Requirements in individual sample plants were from 9.7 to 15.1 hours per 1,000 feet, the rather wide range reflecting chiefly age of plant and diversity of product. There was an apparent decrease of about 25 percent from the labor requirements as determined in a similar, but not entirely comparable, survey in 1935. This decrease resulted from the introduction of several new types of machines which more than offset the effects of a deterioration in log quality and a rise in product standards. Page 67.

Union wages and hours in the building trades, July 1, 1946

Union building-trades journeymen in 75 cities averaged $1.79 an hour, helpers $1.14, on July 1, 1946. These averages resulted from advances of about 11 percent for journeymen and 16 percent for helpers during the year covered by the study. Over 95 percent of the workers included in the survey received wage increases during this period. The study also revealed that there was 1 apprentice for every 9 journeymen in 1946, compared with 1 for every 34 in 1945.

Page 53.

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Current statistics of labor interest in selected periods 1-Continued

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Abbreviations used: BC (Bureau of the

1 Source: Bureau of Labor Statistics unless otherwise indicated. Census); ICC (Interstate Commerce Commission); BAE (Bureau of Agricultural Economics); BFDC (Bureau of Foreign and Domestic Commerce); FR (Federal Reserve); BM (Bureau of Mines); FPC (Federal Power Commission). Most of the current figures are preliminary.

210-month average-March to December 1940-not comparable with later figures. Revisions are in

process.

Excludes employees on public emergency work, these being included in unemployed civilian labor force. Civilian employment in nonagricultural establishments differs from nonagricultural employment in civilian labor force mainly because of the inclusion in the latter of such groups as self-employed and domestic and casual workers.

Includes workers employed by construction contractors and Federal force-account workers (nonmaintenance construction workers employed directly by the Federal Government). Other force-account and nonmaintenance construction employment is included under manufacturing and other groups.

4 November.

• October.

7 September.

Includes current motor vehicle prices. See footnote 1 to table 1, page 115 of this issue.

Third quarter.

10 Not available.

JANUARY 1947

Nature and Extent of Frictional Unemployment1

THE Employment Act of 1946 declares that it is the policy of the Federal Government to foster "conditions under which there will be afforded useful employment opportunities, including self-employment, for those able, willing, and seeking to work." Under the best of conditions, however, there will always be some unemployment arising from delays involved in changing jobs and filling job openings rather than from a lack of employment opportunity. Theoretically this type of unemployment--known as "frictional" unemployment— could be eliminated if workers were so trained and controlled as to be shifted immediately to the occupations, industries, and areas where they were needed at any given time and if workers and employers were deprived of the option of terminating their relationship. But this is contrary to our concept of a free labor market in which an employer can hire and fire, an employee can quit, and a worker can choose his own occupation, industry, and geographic locality of work. Frictional unemployment is also a byproduct of economic efficiency and progress. The growth of new industries and industrial areas, the introduction of technological developments, the marketing of new products and the outmoding of old-all these changes cause shifts in the occupational, industrial, and geographical nature of the demand for labor. Such shifts in demand coupled with a degree of immobility on the part of the labor supply inevitably cause some loss of employment.

It is impossible to determine just how low the volume of frictional unemployment might be brought under favorable conditions. However, experience during past periods, when employment opportunities were good and labor shortages presented no serious problems, indicates that frictional unemployment does not exceed 3 to 4 percent of the labor force, or an annual average of approximately 2 to 21⁄2 million.

1 Prepared by Lester M. Pearlman and Leonard Eskin of the Bureau's Occupational Outlook Division and Edgar E. Poulton of the Labor Economics Staff. Reprints of this article will be available upon request to the Bureau.

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