Unit 2- Unemployment

Population: number of people in a country

Labor force: number of people in a country that are classified as either employed or unemployed

Labor force is made up of
        -Employed
               -able and willing to work
               -must be 16 years of age or older
               -must work at least one hour every two weeks

        -Unemployed

               -people of 16 years age and older that do not have a job

Unemployment: the failure to use available resources, particularly labor, to produce desired goods and services

Underemployment: not using resources to best of ability

Unemployment rate: (Number of unemployed / Total labor force) x 100
        -Total labor force: Number of employed + number of unemployed
        -Ideal unemployment rate is 4 to 5%

Not in labor force
1.Students
2.Prisoners
3.Mental institution
4.Military
5.Disabled
6.People who have given up in looking for a job
7.Homemakers
8.Choose not to work
9.Retired people

Types of Unemployment
1.Frictional: People who are between jobs, temporarily unemployed.
            Ex: High school/college graduates looking for a job, people who are fired and looking for a                    job, people looking for a job

2.Seasonal: Due to the time of the year and nature of the job
            Ex: Lifeguards, bus drivers, construction workers, Santa 

3.Structural: Changes in the structure of the labor force makes some skills obsolete. Workers don't have transferable skills.
            Ex: High school dropout, VCR repairman

4.Cyclical: Results from economic downturns such as recessions. As demand for goods and services fall, demand for labor falls and workers are fired/laid off.

• Frictional and structural unemployment can not be avoided
• Frictional + Structural = Natural Rate of Unemployment (NRU)
• Full employment means there's no cyclical unemployment 
• Ideal unemployment rate is 4-5%
• There will always be unemployment
• NRU and full employment are the same

Okun's Law: For every 1% increase in the unemployment rate causes a 2% decline in real GDP

Rule of 70: Calculates approximate number of years to double GDP