Types of Unemployment

Unemployment→failure to use available resources (labor)
Employed→includes those that are self-employed

Unemployed:

1. new entrants
2. reentrants
3. laid off
4. lost last job (fired)
5. quit last job

NOT in labor force:

• military (armed services)
• homemakers
• students
• retirees
• disabled people
• those in mental institutions
• prisoners

Frictional	·         temporary, transitional, short-term (searching for job, in between jobs) ·         signals new jobs are available and reflects freedom of choice ·         people quit/got fired, or looking for a better job ·         graduates from college
Cyclical	·         economic downturn in business cycle (4) ·         deficient demand for goods and services (caused by recession) ·         jobs do come back (same one or another in field)
Structural	·         Deals w/ tech. 1) automation→job may become obsolete due to change in consumer tastes 2) creative destruction; as jobs are created, others are lost 3) change in skills (ex. NASA→cut program)
Seasonal	·         Jobs dependent on seasons/weather (ex. Lifeguard, Santa Claus, Easter Bunny, construction workers)

Unemployment rate formula→
(# of unemployed/total labor force-# of unemployed+# of employed-)x100
**standard unemployed rate>4-6%

Full employment (FE)→natural rate of unemployment (NRU)

• equal to structural and frictional unemployment
• FE does NOT mean 0 unemployment

Okun's Law:

• describes how unemployment relates to a nation's GDP
• states that for every 1% unemployment above the NRU, a (-) GDP gap of 2% will occur

Unequal burdens of unemployment:

1. rates are lower for white-collar workers
2. teens have highest rates
3. blacks have higher rates than whites
4. rates for males and females are comparable