2/9/17: What is Unemployment?

• Unemployment
• The percent of people in the labor force who want a job but are not working.

• Labor Force
• # of people in a country that are classified as either employed or unemployed.
• Employed
• Anyone who works at least 1 hour a month.
• Anyone considered temporarily absent from work.
• Part-time workers
• Those who are NOT in the labor force
• Kids
• Full-time students
• People in mental institutions
• Military personnel
• Stay at home moms & dads
• Retirees
• People who are incarcerated
• Discouraged workers (mentally & psychologically beaten down)
• Unemployment Rate
• # of Unemployed / # in Labor Force (employed + unemployed) x 100
• Standard Unemployment Rate
• 4 to 5%
• Higher than 5 = recession
• 4 Types of Unemployment
1. Frictional Unemployment
• "Temporarily unemplyed" or being between jobs
• Individuals are qualified workers with transferable skills but they aren't working.
2.  Seasonal Unemployment
• This is a specific type of frictional unemployment which is due to time of year & the nature of the job.
• These jobs will come back
3.  Structural Unemployment
• Changes in the structure of the labor force make some skills absolete.
• Workers do NOT have transferable skills & these jobs will never come back.
• The Permanent loss of these jobs is called "creative destruction" (new replaces old) 
4. Cyclical Unemployment
• Unemployment that results from economic downturns (recessions)
• As demand for goods & services falls

• Natural Rate of Unemployment (Full Employment)
• Frictional + Structural = NRU (4 to 5 %)

• Full employment means NO cyclical unemployment

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