Economics Unit 6, Lesson 3©2012, TESCCC

Objectives Define unemployment Describe the different types of unemployment Describe how full employment is measured ©2012, TESCCC

Unemployment The number of people (over 16) who do not have jobs but are actively seeking a job. ©2012, TESCCC

What are the problems with unemployment figures? 1. hidden unemployment or discouraged worker. This is the worker who is no longer looking for a job so he would not be included with the unemployment number. This worker is still a problem for the economy. We are not using this labor resource efficiently. ©2012, TESCCC

Problems with the unemployment figures 2.under employment- worker’s skills do not match jobs. The worker is overqualified for a job or working at a job below their skills. This could be a person with a master’s degree in English who is working as a waiter. Again, we are not using this labor resource efficiently. Causes unemployment numbers to be understated ©2012, TESCCC

Four Types of Unemployment ©2012, TESCCC

1. Frictional - “ between jobs” considered normal, a worker leaves a job to look for a better one. Work your way through college as a waiter and quit to look for better job with your degrees ©2012, TESCCC

Types of Unemployment 2.Seasonal - weather change or annual patterns, change of seasons or weather, cause job loss. ©2012, TESCCC

3. Structural -change in how economy operates; an entire industry fails; people no longer demand or want that product. -The worker’s skills do not match the jobs that are available – workers need new training to enter different industry – There are four major causes of structural unemployment ©2012, TESCCC

Four Causes of Structural Unemployment 1.New technology – new innovations and ideas sometimes make the old ones obsolete. 2.Change in consumer demand – tastes change and consumers may stop purchasing old items 3.Globalization – jobs may be relocated to another country 4.Lack of education – some people do not have the minimum education or training for the jobs available today. ©2012, TESCCC

4. Cyclical - jobs are lost in correlation with the business cycle (recession - lose job). Some feel that this is the worst type of unemployment. ©2012, TESCCC

Economic Impact of unemployment is that our standard of living goes down and the economy faces an economic slowdown. ©2012, TESCCC

Full employment An unemployment rate between 4% - 6% is considered full employment or the Natural Rate of Unemployment (NRU). NRU = frictional + structural ©2012, TESCCC