Economic Challenges Chapter 13 Section 1 Unemployment

Economic Challenges Objectives: Describe frictional, seasonal, structural, and cyclical unemployment. Describe how full employment is measured. Explain why full employment does not mean that every worker is employed.

Economic Challenges Unemployment in the late 1990s and early 2000s were at an all-time low. Millions of Americans were still looking for work. Unemployment is a national issue. Congress, the President, and other policy makers pay close attention to the unemployment numbers.

Economic Challenges I. Frictional Unemployment - Unemployment will always exist! - Even when we have a booming economy! - This occurs when people take time to find a job. - People will change jobs, be laid off from their current job, need some time to find the right job after they finish their schooling.

Economic Challenges Examples: Olga was not satisfied working as a nurse in a large hospital. Last month she left her job to begin looking for a position at a small health clinic. Since Ethan graduated from law school three months ago, he has been interviewing with various law firms to find the one that best suits his needs and interests. Liz left her sales job two years ago to care for any aging parent. Now she is trying to return to the work force.

Economic Challenges II. Seasonal Unemployment - Greg is a brick layer for a company in the northeast part of the country. - Every year his company lays off all the employees when the cold weather forces an end to the outdoor work. - Occurs when industries slow or shut down for a season to make seasonal shifts in their production schedules.

Economic Challenges - Government policymakers do not attempt to take steps to prevent this kind of unemployment, because it is a normal part of a healthy economy. - Migrant agricultural workers are considered to be seasonal and therefore suffer through seasonal unemployment.

Economic Challenges III. Structural Unemployment - With our economy changing through history from an agricultural society then to an industrial society and now to a service industry society, we have seen shifts in the labor market cause problems. - Workers who lack the necessary skills lose their jobs.

Economic Challenges - This type of unemployment occurs when workers’ skills do not match the jobs that are available. - Five Major Causes of Structural Unemployment: 1. The development of new technology: New inventions often push out older ways of doing things. With the invention of CDs, the need for phonographs declined because the need was not there.

Economic Challenges 2. The discovery of new resources: * New resources replace old resources and the industries that provide them. * Whaling ships went out of business in 1859 when the development of petroleum. 3. Changes in consumer demand: * Consumers often stop buying one product in favor of another. * People today buy fewer traditional shoes and more casual shoes like sneakers.

Economic Challenges 4. Globalization: * Recent trends in the world economy include a shift from local to global markets. * Companies often have to relocate jobs or entire facilities to another country.

Economic Challenges 5. Lack of Education: * People who drop out of school or fail to acquire the minimum skills needed for today’s job market may find themselves unemployed, employed part-time, or stuck in low- wage jobs. * The government has developed job training programs to help those workers who are not up-to-date with the needed skills. * Retraining takes a long time, and the new skills do not assure the trainees a high-wage job. * Some companies offer training programs of their own to help their employees.

Economic Challenges IV. Cyclical Unemployment - Occurs when unemployment that rises during economic downturns and falls when the economy improves. -During recessions, demand for goods and service drops. - The result is a slowdown in production causes the demand for labor to drop as well.

Economic Challenges - Many laid off workers will get rehired when the recession ends and the business cycle resumes an upward trend. - The most damaging example of cyclical unemployment in the 20 th century was the Great Depression. - During the Depression, one out of every four workers was unemployed. - Pres. Roosevelt and Congress passed the Social Security Act of This act established a program for unemployment insurance that would provide weekly payments to workers who have lost their jobs.

Economic Challenges Measuring Unemployment The amount of unemployment in the nation is an important clue to the health of the economy. The government keeps track of how many people are unemployed and why. The US Bureau of the Census conducts a monthly census relating to the size and other characteristics of the population.

Economic Challenges Census – an official count of the population. The US Department of the Labor polls about 50,000 families and conducts interviews about employment during that month. They figure out the unemployment rate based on the information collected.

Economic Challenges Determining the Unemployment Rate… Take the number of people unemployed divided by the number of people in the civilian labor force multiplied by 100. The BLS takes the info collected and puts the data into their computers and it calculates the unemployment rate.

Economic Challenges Full Employment… Is it possible for a market economy to reach 0 percent unemployment?

Economic Challenges Full Employment… NO This goal is unattainable in a market economy. Economists say that an unemployment rate of around 4 to 6 percent is normal (the best it can be).

Economic Challenges Underemployment… Full employment means that nearly everyone who wants a job has a job, but are all those people satisfied with their jobs? Some people are working at low-skill, low- wage jobs may be highly skilled or educated in a field with few opportunities. They are considered to be underemployed – that is, working at a job for which they are over-qualified or working part-time when they desire full-time work.

Economic Challenges Example: Jim majors in Philosophy while attending college. He can’t find a job in that field so he gets a job waiting on tables. Many people who are part-time workers and seasonal workers are those that fit into a situation of people who want a permanent, full-time hob but have not been able to find one.

Economic Challenges Discouraged Workers Some people give up hope of finding a job. Discourage workers – have stopped searching for employment and may need to rely on other family members or savings to support them. Discouraged workers do not appear in the unemployment rate.

Economic Challenges Effects of Terrorism… Since the 9-11 attacks, many Americans have lost their jobs. Most of those losses have been in the travel and tourism industries. The largest drop-off was in transportation. New York City lost some 150,000 jobs because of this disaster.