Unemployment

Unemployment - Percentage of people who do not have a job but are part of the labor force

Labor force - the number of people in a country that are classified as either employed or unemployed 

Unemployment rate: equals (the number of unemployed / number of employed + number of unemployed ) x 100

The ideal rate is 4-5 %

Not in the labor force-

1.      Kids

2.      Retired people

3.      Military personnel 

4.      Mentally insane

5.      Incarcerated 

6.      Full time student 

7.      Stay at home parent

8.      Discouraged workers  

Types of unemployment:

Frictional - Between jobs because you choose new opportunities new choices new lifestyles or educational levels 

Structural - Lack of skills or a decline in industry or change in technology 

Seasonal - People are waiting for the right season to go to work 

Ex. Santa Claus; Lifeguards 

Cyclical – Occurs due to a swing in the economy; downturns in business cycle

Full employment - Occurs when there is no cyclical unemployment present in the economy 

Natural rate of unemployment(NRU) –When the economy is producing at its best.

Why is unemployment good?

1.      Less pressure to raise wages 

2.      More workers available for future expansions 

Why is unemployment bad?

1.      There is not enough consumption  (GDP)

2.      Too much poverty 

3.      Too much government assistance is needed

Okun’s law - For every 1 % of unemployment above the NRU causes a 2 % decline in real GDP