Unemployment Flashcard Example #69705

Unemployment Rate
The percent of people in the labor force who want a job but are not working
Unemployment Rate Equation
Unemployment Rate = #unemployed/ # in labor force * 100
Who is in the Labor Force?
1. Above 16 years old
2. Able and willing to work
3. Not Institutionalized
4. Not in military, in school full time, or retired
3 Types of Unemployment
1. Frictional Unemployment
2. Structural Unemployment
3. Cyclical Unemployment
Frictional Unemployment
1. “Temporarily unemployed” or between jobs
2. Individuals are qualified workers with transferable skills but they aren’t working
Ex: High school graduate looking for job
Seasonal Unemployment
1. Specific type of frictional unemployment which is due to time of year and the nature of the job
2. These jobs will come back
Structural Unemployment
1. Changes in the structure of the labor force make some skills obsolete
2. Workers DO NOT have transferable skills and these jobs will never come back
3. Workers must learn new skills to get a job
“Creative Destruction”
Permanent loss of jobs
Technological Unemployment
Structural Unemployment where automation and machinery replace workers causing unemployment
Cyclical Unemployment
1. Unemployment that results from economic downturns (recessions)
2. As demand for goods and services falls, demand for labor falls, and workers are fired
Ex: Workers laid off
Natural Rate of Unemployment
*Frictional Unemployment
*Structural Unemployment
(are unavoidable)
Full Employment
Is when we only have the natural rate of unemployment
(Normal amount of unemployment we should have)
; # of job seekers equals the number of job vacancies
Full employment means NO cyclical unemployment
Okun’s Law
When unemployment rises 1% above the natural rate, GDP falls by about 2%
Unemployment Rates
U.S. – 5.5%
France- 10%
Germany- 4.2%
What is wrong with the Unemployment Rate?
Can misdiagnose the actual unemployment rate because:
1. Discouraged Job Seekers
2. Part- Time Workers
3. Race Age Inequalities
4. Illegal Labor
Discouraged Job Seekers
Some unemployed people stop looking for a job so they are no longer counted in the labor force
Part- Time Workers
Someone who is part time but wants to work full time is still considered fully emoloyed
Race Age Inequalities
Hispanics- 6.6
African Americans – 10.2
Teenagers – 20.6
Illegal Labor
People work under the table

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