Unit 2: Unemployment

February 20, 2018

Unit 2: Unemployment

• Definition: It is the failure to use unavailable resources particularly labor to produce desire, good and services.
• Population: number of people in a country
• Labor force: number of people in a country that are classified either employed or unemployed.

• People not in the Labor force:
1. Kids
2. Military personnel
3. Homemakers
4. Institutionalized
5. Retired people
6. Incarcerated
7. Full-time students
8. Discouraged workers
• Employed:
• people who are 16 years or older that have a job
• must work at least 1 hour every two weeks.
• Unemployed:
• People who are 16 years older that do not have a job but they have actively searched for one in the last 2 weeks.
• Unemployment Rate:

(# of unemployed/ total labor force) x 100

• Total Labor Force:

# of unemployed + # of employed

Types of Employment

• Frictional: temporarily unemployed or between jobs 
• they are qualified and have transferrable skills.
• college graduates
• Seasonal: due to the time of year where their skills may be required
• Example: lifeguard, Santa Clause, Easter Bunny, Construction Workers
• Structural: changed in industry/ lack of skills
• workers do not have transferrable skills.
• Example: VCR repairer person, typewriter repairer person
• "creative destruction"- permanent loss of jobs due to being absolute
• high school "dropouts"
• Cyclical: it results from economic downturn
• Example: recession
• As demand as goods and services, demand for labor falls and workers are laid off.

• Full Employment
• 4%-5% unemployment
• there is no cyclical unemployment
• NRU (Natural Rate of Unemployment) =Frictional and structural employment

• Okun's Law: states that for every 1% that unemployment rises above the NRU, GDP will fall by 2%.
• Rule of 70: # of years required for GDP to double
• Example: If the annual inflation rate is 2%, it will take 35 years.
• Formula: 70/ inflation rate