ECON-1010 Chapter : 8-Unemployment
12 May 2022
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UNEMPLOYMENT
➔Unemployment rate = # of individuals unemployed / labor force
◆Unemployed: do not have jobs and are actively looking for jobs
◆Labor force: those who have jobs and those looking for jobs
●Current: ~160 million people
➔Unemployment means we are not using all of our available resources =
economically inefficient
➔“Full” employment occurs when unemployment rates are ~4-5.5% (because of
natural levels of unemployment)
➢To be included in the labor force an individual must be a non-institutionalized
civilian above the age of 16 who is either working or looking for work
➢Okun’s law: states for every 1% increase in unemployment, real GDP decreases
by approximately 2%
➢Unemployment rates can be deceiving (vary tremendously among people with
different educations, races, genders, etc.)
➢Labor force participation rate: the percentage of the population, 16 years and
older, that is either employed or actively looking for work
○Potential issue to consider when looking at labor market
➢Currently at lowest participation rate since mid-1970s
○Due to:
■Aging population
■Decreased demand for lower-skilled, low-educated workers
■Increasingly long spells of unemployment
➢Frustration w/ inability to find job → stop looking → not considered part of labor
force anymore
➢Another consideration is underemployment
➢4 primary categories of causes of unemployment:
○Seasonal unemployment: predictable unemployment caused by changes
in seasons (school year, weather, major holidays, etc.)
○Structural unemployment: caused by a mismatch of skills and job
opportunities
■Sometimes caused by lack of skills (ex: high school dropout)
■Sometimes caused by new tech replacing jobs
○Frictional unemployment: caused by normal process of leaving jobs,
getting fired, graduating, and searching for new jobs
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Document Summary
Unemployment rate = # of individuals unemployed / labor force. Unemployed: do not have jobs and are actively looking for jobs. Labor force: those who have jobs and those looking for jobs. Unemployment means we are not using all of our available resources = economically inef cient. Full employment occurs when unemployment rates are ~4-5. 5% (because of natural levels of unemployment) To be included in the labor force an individual must be a non-institutionalized civilian above the age of 16 who is either working or looking for work. Okun"s law: states for every 1% increase in unemployment, real gdp decreases by approximately 2% Unemployment rates can be deceiving (vary tremendously among people with different educations, races, genders, etc. ) Labor force participation rate: the percentage of the population, 16 years and older, that is either employed or actively looking for work. Potential issue to consider when looking at labor market. Currently at lowest participation rate since mid-1970s.
