1. Unemployment
by: Mrs. Erin Cervi

2. Important Clarifications
Unemployed Defined (U): Persons in the labor force who made an effort to look for work within the last month.
Who is NOT included in the labor force? (click here for a video link)
To calculate the labor force add the employed to the unemployed
Employed (E): The number of adult civilians who are working and on a payroll of some type.
Unemployed (U): The number of adult civilians who are not working but are actively seeking work.

3. U.S. Unemployment Rate Since 1900

4. Calculating the Unemployment Rate
Example, if 8.2 million people are unemployed in the U.S. and the size of the labor force is million people, unemployment rate is.
(8.2/146.8) X 100 = 5.6%.
Unemployment =
rate
# of people unemployed
# of people in the labor force
× 100

5. Types of Unemployment
Frictional
Structural
Cyclical
Seasonal

6. Frictional Unemployment
Workers in between or searching for the “right” fit
This is unemployment caused by change in the workers’ circumstances.
Examples: college students looking for first job, individuals re-entering the workforce, Simon Cowell stepping down from judging American Idol.
Frictional unemployment does not usually last long and results in a better match-up between workers and jobs.

7. Structural Unemployment
Structural means that the skill sets of the former workers do not match the skills sets of the new economic structure.
In this type of unemployment, job retraining or education is essential for people to find new jobs.

8. Cyclical Unemployment
This type of unemployment is due to shifts in the business cycle affecting the whole economy.
When the economy slows down, these jobs are lost.
However, when the economy rebounds, workers usually are rehired in the same or similar jobs.
Examples: Macy’s lays off part of its workforce as sales fall, home builders are not hiring contractors because of the slow housing market, designer jean sales slip resulting in the closure of high-end boutique stores.

9. Seasonal Unemployment
Unemployment caused by seasonal changes in labor demand during the year.
These jobs will return when the season (time of year) returns.
Examples?

10. Other Important Definitions
Full employment occurs when there is no cyclical unemployment; relatively low unemployment.
Even when the economy is at full employment, there will be some frictional, structural, and seasonal unemployment.
Underemployment: Workers are overqualified for their jobs or work fewer hours than they would prefer.