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Unemployment

Unemployment. AP Economics 4° Mathangi Sridharan Evan Ostrowski David Arney Ahmad Dahman. Definition/Measurement of Unemployment.

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Unemployment

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  1. Unemployment AP Economics 4° MathangiSridharan Evan Ostrowski David Arney Ahmad Dahman

  2. Definition/Measurement of Unemployment • Unemployment occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy. The most frequently cited measure of unemployment is the unemployment rate. This is the number of unemployed persons divided by the number of people in the labor force.

  3. Structural Unemployment • Changes in the structure of the labor force make some skills obsolete • Workers do NOT have transferrable skills and these jobs will never come back • Workers must learn new skill to get job • Permanent loss of these jobs=“creative destruction” • Ex: VCR repairmen, carriage maker

  4. Technological Unemployment • Type of structural unemployment where automation and machinery replace workers causing unemployment • Ex: Auto assemblers fired after automation takes over

  5. Frictional Unemployment • Individuals that are temporarily unemployed or between jobs • Qualified workers, transferable skills • Ex. College graduate looking for a job • Can also be seasonally unemployed • Ex. Santa Clause impersonators

  6. Cyclical Unemployment • Unemployment that results from economic downturns (recessions) • When demand for goods and services falls, demand for labor falls and workers are fired • Ex. Steel workers laid off

  7. Natural Rate of Unemployment • Lowest rate of unemployment an economy can sustain over a long period of time (generally 4-6%) • Full employment: # of job seekers equals # of job vacancies • Okun’s Law: Unemployment increases by 1% above the NRU, Real GDP decreases by 2-3%

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