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UNIT 2 - Employment, Unemployment, Natural Rate of Unemployment

Unemployment - failure to use available resources, particularly labor, to produce desired goods and services
                * Rate -# of unemployed
                             --------------------- X 100
                              total labor force
                      (# of unemployed + employed)
            Frictional
           - Temporarily unemployed or "in-between" jobs
           - Qualified workers w/ transferable skills
           - HS or college degree
           -Better Opportunity
            Seasonal  (working a certain time of the year)          
            -Lifeguards
            -Construction Workers
            -School Bus Drivers
            -Mall Santas
            -Easter Bunny
            Structural
            - changes in the structure of labor force makes some skills obsolete
            -No transferrable skills
             -Ex: VCR Repairman, typewriter repairman
            -Creative Destruction - As new job are created, old jobs are lost
            Cyclical
             -Unemployment that results from economic downturns
             -As demand for goods and services falls, demand for labor falls and workers are laid off

Basic Vocab
Population - # of ppl in a country
Labor Force - # of ppl in a country classified as employed or unemployed
Employed - ppl 16 years or older that have a job
Unemployed - ppl 16 years or older who do not have a job, but actively searched for job in the last 2 weeks

Not in Labor Force
1) Kids (younger than 16)
2) Full-Time students
3) Retirees
4) Disabled
5) Mentally Institutionalized
6) Incarcerated
7) Military People
8) Homemakers
9) Discouraged workers

Full Employment or NRU (Natural Rate of Unemployment) - 4-5% unemployment
Frictional + Structural unemployment
Cyclical Unemployment = 0
Okun's Law - For every 1%  by which the unemployment rate exceeds the NRU, real GDP will fall by 2 %
Rule of 70: The # of years it takes for GDP to double
Ex: if the annual inflation rate is 2%, how many years will it take for real GDP to double?[70/2 = 35 years]

Comments

  1. UnknownFebruary 27, 2018 at 7:35 PM

    I would add that one works a certain time of the year for seasonal unemployment before listing your examples to provide a clear definition of the unemployment type. In addition, I would note that there must be no cyclical unemployment for there to be full employment.

    ReplyDelete

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