Unit 12-Unemployment Rate

Unemployment

Number of people actively searching for a job for 4+ weeks who are unable to find one

Employed

Currently has a job, part time or full time

Labor force participation rate

Labor Force age range

16-64

Unemployment rate

What does the unemployment rate indicate?

How easy or hard it is to get a job

Discourage workers

Unemployed who gave up on looking for a job (not counted)

Marginal Attached Workers

would like to be employed and have looked for a job in the recent past but are not currently looking for work.

U3 unemployment rate

Official unemployment rate

U4 unemployment rate

The total number of unemployed people plus discouraged workers.

U5 unemployment rate

U4 + other "marginally attached workers",

U6 unemployment rate

U5 + Part-time workers who want to work full-time, but cannot due to economic reasons (underemployment).

Underemployment

People who want to work more hours but can’t

U1 unemployment

The percentage of people unemployed for 15 weeks or more.

U2 unemployment

The percentage of people who lost their jobs and anyone who finished a temporary job.

During a recession unemployment ___

rises

During expansion unemployment ___

falls

Frictional unemployment

unemployment due to the time workers spend in job search

Causes of frictional unemployment

1. The constant process of job destruction and job creation.

2. New workers are always entering the labor force.

Does frictional unemployment always exist?

Yes, there are always people looking for better jobs or even their first job.

If unemployment is low most of it is probably ____

Frictional unemployment

Structural unemployment (skills)

unemployment that results when workers lack the skills required for the jobs that are available

Structural unemployment (jobs)

unemployment that results when more people are seeking jobs in a labor market than there are jobs available at the current wage rate.

Causes of structural unemployment

1. lack of skills

2. lack of automation

3. lack of geographic migration

4. minimum wages

5. insufficient product demand

High minimum. wages cause:

A surplus of labor, AKA structural unemployment

Labor unions fighting for higher wages and more benefits can cause:

Structural unemployment

Efficiency wages

employers set wages above equilibrium as an incentive for better employee performance (can cause structural unemployment).

Natural unemployment

Frictional+Structural unemployment

Actual unemployment

Natural+Cyclical unemployment

Cyclical unemployment

the share of unemployment that arises from the

business cycle. (layoffs in a poor economy)

Causes of cyclical unemployment

Changes in the Labor Force, Labor Market Institutions, Changes in Government Policies