UNEMPLOYMENT

Think of all the words connected to unemployment and fill in as many as you can think apply to the word.

Types of Unemployment

Frictional - Occurs when people are laid off or take time off from work

Accepted part of an economy that is working properly

Ex. A clothing store clerk is laid off when the owner retires and sells the business

Why is this an example of frictional unemployment?

Seasonal Unemployment

Occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season.

A normal part of a healthy economy Ex. Landscaper who is temporarily laid

off during the winter and rehired in the spring

Structural Unemployment

Occurs when workers’ skills do not match the jobs that are available.

Can be overcome through retraining. An expected part of a properly working,

continually advancing economy. Ex. Automobile worker is laid off when the

company moves its work to another country. No similar work is available locally

Cyclical Unemployment

Rises during economic downturns, or recessions, and falls when the economy returns.

A recurring part of the business cycle but indicates that the economy is not working properly.

Ex. A steel worker is laid off when a recession causes a large decrease in the demand for steel.

Full employment

When working properly, the natural rate of unemployment is between 4 – 6%.

When there is NO cyclical unemployment, we call this full employment.

Underemployment

Due to a loss in a job, when a person is forced to take a lower quality job even though a person’s skill and education is clearly over-qualified for the job.

Forget the confusing way and just follow the formula

Unemployment Rate = Number of People unemployed / Civilian Labor Force Multiplied by 100.

Civilian labor Force = Employed + unemployed

Let’s Practice

Calculate the unemployment rate based on the following statistics. There are 500,000 people in the economy. Currently, 300,000 people are currently employed. And 20,000 people are currently looking for a job, but cannot find one.

What’s the answer?

6.25%