Unemployment

Unemployment Rate: The percent of people in the labor force who want a job but are not working 
Labor Force: The number of people in a country that are classified as either employed or unemployed

Employed:

• Anybody that works at least one hour per month

• Anyone considered to be temporarily absent from work

• Part Time Workers

Not in the Labor Force:

• Kids

• Full Time Students 

• People in Mental Institutions

• Military Personnel 

• Stay at home mom's/dad's 

• Retirees 

• Incarcerated (@ least 6 months)

• Discouraged Workers (Mentally/Physically Broken Down ----> Stopped looking for job; Hopeless)

Unemployment Rate: # of Unemployed / # in Labor Force (Labor Force= # of unemployed + # of employed)
Standard Unemployment Rate: 4-5%

• > 5% = Possible Recession

• < 4% = :D

4 Types of Unemployment1. Frictional Unemployment 

• "Temporarily Unemployed" or being between jobs

• Individual are qualified workers with transferable skills but they aren't working

• EX: New graduate looking for a job

2. Seasonal Unemployment

• There is a specific type of frictional unemployment which is due to the time of the year and nature of the job

• These jobs will come back

• EX: Santa Clause/Easter Bunny

3. Structural Unemployment 

• Changes in the structure of the labor force make some skills obsolete

• Workers DO NOT have transferable skills and these jobs will never come back

• Workers must learn new skills to get a job

• Permanent Loss= Creative Destruction

• EX: Decline of one industry and the rise of another

4. Cyclical Unemployment 

• Unemployment that results from economic downturns (recessions)

• As demand for goods and services fall, demand for labor falls and workers are fired

Natural Rate of Unemployment (NRU)

Frictional + Structural 

Full employment means NO cyclical unemployment!

Okun's Law: When unemployment rises 1% above the natural rate, GDP falls by about 2%