4-Types of Unemployment & Full Employment Theory

Today’s Unemployment Rate Labor Force: 153,000,000 Unemployed Workers 7,200,000 Unemployment Rate 4.7% (7.2 / 147.5 million) = 4.7% )

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Unemployment By Education Why go to college? Unemployment By Education Less Than High School: 9.4% High School Graduate: 5.9% Less Than a Bachelor’s 4.5% College Graduate 2.7%

4-Types of Unemployment Structural Skills do not match demand for labor Cyclical Too low a level of aggregate demand Frictional Temporarily between Jobs Seasonal Out of work based on time of year

Full Employment Full employment = 4% allows for some frictional & structural The lowest rate possible without causing inflation In the long run, unemployment cannot fall below the full employment level

Which Unemployment? Unemployment rate 4.5%. A trained plumber cannot find a job in his industry A trained plumber cannot find a job in his industry during a recession A golf instructor who works in Vermont has no work in December A technology work was laid off and is currently looking for work A stock market crash leads to a stock broker losing his job

Sample Problem: Fiscal Policy Current Economy AD1 AS1 Unemployment 3.0% GDP +6.0% Inflation rising Price Level AD2 Real GDP

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