Facing Economic Challenges Unemployment Facing Economic Challenges

Key Questions

Unemployment Unemployment has a variety of causes Some level of unemployment is expected, even when an economy is healthy As the nation goes through business cycles, it faces the problems of unemployment and inflation Persistent unemployment can lead to poverty During periods of inflation, wages buy less

Measuring Unemployment The Unemployment Rate Share of the civilian labor force that is jobless, expressed as a percentage Bureau of Labor Statistics determines unemployment rate divides number of unemployed workers by total in civilian labor force does not count discouraged workers who have stopped looking or are underemployed Underemployed work part-time, want full-time or work below skill level

Measuring Unemployment Full Employment No unemployment caused by decreased economic activity Always some degree of unemployment: people relocate; look for better job; can’t find appropriate job Unemployment rate of 4 to 6 percent considered full employment in U.S. Different acceptable rates in countries with different labor markets, economic policies January 2017: U.S. 4.8%, Michigan 5.2%

Underemployment Rate This statistic shows the U.S. underemployment rate on a monthly basis for the ongoing year. The survey is conducted doing daily telephone interviews among about 30,000 adults per month in the U.S. The graph shows the 30-day average for each month to depict an annual trend. The rate is created by adding unemployed workers, who are looking for work, to the amount of workers employed part time but seeking full-time work. In April 2017, the U.S. underemployment rate was 14 percent.

Types of Unemployment Frictional Unemployment Seasonal Unemployment Not a threat to economic stability Reflects workers’ freedom to find best job at highest wage Childrearing parents returning to work new college graduates looking for first job experienced workers who want to switch jobs Seasonal Unemployment Demand for some jobs changes dramatically from season to season construction work falls off in winter tourism peaks at certain times of year; varies by region migrant farm work drops off in winter; migrant families suffer

Types of Unemployment Structural Unemployment Cyclical Unemployment As businesses become more efficient, require fewer workers new technologies replace workers or require them to retrain new industries requiring specialized education do not employ unskilled change in consumer demand can shift type of workers needed offshore outsourcing sometimes leaves people out of work Cyclical Unemployment Employers lay off workers during low points in business cycle During recession, hard to find new jobs since demand for labor drops Unemployment period varies by type; average relatively short over one third of unemployed find work in five weeks or less