Unemployment

Unemployment rate: 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:

1. someone who works at least one hour a month
2. someone considered temporarily absent from work 
3. Part-time people 

Not in Labor Force: 

1. Kids
2. Full-Time Students
3. People who are in mental institutions
4. Military personnel
5. Stay at home parents 
6. Retirees  
7. People who are incarcerated (time in jail)
8. Discouraged workers 

Unemployment rate=  (# unemployed/ # in labor force(# unemployed + # employed)) x 100

Standard Unemployment Rate= 4-5%

Types of Unemployment:

1. Frictional Unemployment:  

• "Temporarily unemployed" or being between jobs
• Qualified workers with transferable skills but they aren't working 

      2.  Seasonal Unemployment: 

• Time of the year and the nature of the job 
• These jobs will come back 
• Ex: Santa claus, easter bunnies, lifeguards 

       3.  Structural Unemployment

• 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 of these jobs is called "creative destruction" 

      4.  Cyclical Unemployment

•  Unemployment that results from economic downturns (Recessions) 
• AS demand for goods and services falls, demand for labor falls and workers are fired. 

Frictional Unemployment + Structural Unemployment = Natural Rate of Unemployment (Full employment)(4-5%)

Full employment means NO cyclical unemployment 

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