Sunday, February 16, 2014

Unemployment: percentage of people who do not have jobs, but are in labor force

Labor force: Employed + Unemployment

Not in labor force
  •  Kids
  •  Military personnel
  •  Mentally insane
  •  Imprisoned
  •  Stay-at-home-moms/dads
  •  Full-time students
  •  Retired people
  •  Discouraged workers


Employed: 16 years or older and have a job

Unemployed: 16 years or older and don't have a job actively looking for a job for at least 2 weeks

Unemployment rate
[(# of unemployed)/(Labor force (# of employed + unemployed))]x100
Types of unemployment
  • Seasonal: Waiting for right time to conduct business Ex: Mall santa, lifeguard, school bus driver, concession stand

  • Frictional: New opportunities, change in educational level, change in lifestyle, change in choices, in between jobs
  • Structural: Lack of skill, change in technology, declining industry
  • Cyclical: Downturns in business cycle bad for society as well as individuals
  • Recession
  • Full employment (FE)
  • NRU (Natural rate of unemployment) = 4-5%
  • Okun's law: For every 1% of unemployment above the NRU, causes a 2% decline in Real GDP

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