Economic Challenges
Unemployment
Unemployment
• Policy makers and economic analysts
gauge the health of the U.S. economy by
examining the labor force and
unemployment:
– How many workers are unemployed?
– How long have they been jobless?
– How does unemployment differ for specific
industries and geographic regions?
Measuring Unemployment
• U.S. Bureau of
Census conducts
monthly study called
the Current
Population Survey
• Sample of about
60,000 households
across the country
• U.S. Department of
Labor analyzes the
data
Identifying the Employed and
Unemployed
• The Census Bureau
defines individuals ages
16 and older as employed
if during the survey week
they:
• Worked for pay one or
more hours
• Worked without pay in a
family business 15 or
more hours, or…
• Have jobs but did not
work because of illness,
weather, vacations, or
labor disputes
• Individuals are classified
as “unemployed” if they
do not meet any of the
criteria for employed
status
• These people must have
been actively looking for
work during the past four
weeks
Unemployment Rate
• The percentage of
people in the civilian
labor force who are
unemployed
• This is the most
closely watched and
highly publicized labor
force statistic
Problems with the Unemployment
Rate
• It does not indicate
the differences in
intensity with which
people look for jobs
Discouraged
• Conditions for being
included among the
unemployed exclude
some who most people
would think of as
unemployed – people
who want jobs and once
held productive jobs, but
lost their jobs and have
gotten discouraged &
given up looking for work
Underemployed
• It does not indicate
the number of
underemployed
workers
• These are workers
who have jobs
beneath their skill
level or who want fulltime work but are only
able to find part-time
jobs
Four Types of Unemployment
•
•
•
•
Frictional
Structural
Seasonal
Cyclical
Frictional Unemployment
• When workers are
moving from one job to
another
• Economists consider
frictional unemployment a
normal part of a healthy
and changing economy
• Reflects workers’
freedom of choice in the
labor market
• Often indicates new jobs
available in new
industries
Structural Unemployment
• Unemployment that
occurs as a result of
changes in technology or
in the way the economy
is structured
• Technological advances
and shifts in consumers’
tastes can result in a
change or decline of
entire industries
Seasonal Unemployment
• Changes in the
unemployment rate from
season to season due to
regular occurrences such
as holidays, the school
year, harvest schedules,
and industry production
schedules
• Agricultural workers are
particularly affected
Cyclical Unemployment
• Unemployment
resulting from
recessions and
economic downturns
• More harmful to an
economy than any
other type of
unemployment
Cyclical Unemployment
• When sales decline,
producers cut back
production, lay
workers off
• Increased
unemployment further
reduces total
demand, leads to
more layoffs, higher
unemployment
Cyclical Unemployment
• When the economy
begins to expand
again, total demand
for goods and
services rises
• Producers hire more
workers to increase
output
• The level of
unemployment begins
to decrease