Unemployment - February 09, 2017

Unemployment

• Unemployment:
  - % of people who do not have jobs that are in the labor force
  
• Unemployment rate:
  - # unemployed   *100
    # in labor force
  -Labor force: employed + unemployed
  -Standard # is 4-5%
  
  
• Not Counted in the labor force:
  -Kids
  -Military personnel
  -People in mental institutions
  -Homemakers
  -Retired people
  -Full time students
  -Incarcerated people
  -Discouraged
  
  
• 4 types of unemployment
  1) Frictional
      -Temporarily employed or in between jobs
      -Individuals are qualified workers with transferable skills but arent working
      -Individuals who are fired and looking for better jobs
  
  2) Seasonal
      -Specific type of frictional unemployment which is due to the time of the year and nature of the job
      -These jobs will come back
      -Construction workers are an example
  
  3) Structural 
      -Changes in the structure of the labor force makes some skills obsolete
      -Workers do not have transferable skills and these jobs will never come back
      -Workers must learn new skills to get a job
      -The permanent loss of these jobs is called "creative destruction"
     
  4) Cyclical
      -Downturns in the business cycle, which will result in a recession
      -As demand for goods and services falls, demand for labor falls and workers are fired
      -Restaurant owners fire workers after months of poor sales due to recessions
  
• The national rate and Full Employment
  -Two of the three tyoes of unemployment are unavoidable ( frictional and structural)
  - Frictioanl (+) Structural (=) NRU (4-5%)
  - National rate of unemployment is NRU
  - Full employment = no cyclical unemployment
  
• Okun's law:
  -When unemployment rises 1% above the NRU, GDP falls about 2%
  
• Who are employed people?
  - Part-time workers
  - Leave of absence
  - Employed even if you work 1 hour a month