Discouraged workers are those that quit looking for a job in periods of prolonged recession, thinking that the chances of landing a job are very bleak. Individuals who have not actively sought work for four weeks are not counted as unemployed; instead, they fall out of the labor force. Are Unemployment Statistics Accurate Reflections of the Labor Market?
According to the Bureau of Labor Statistics, the four main categories of unemployed workers are Job losers (those who have been temporarily laid off or fired). Job leavers (those who have quit their jobs). Categories of Unemployed Workers
Even though unemployment is painful to those who have no source of income, reducing unemployment is not costless. In the short run, a reduction in unemployment may come at the expense of a higher rate of inflation, especially if the economy is close to full capacity, where resources are almost fully employed. How Much Unemployment?
The duration of unemployment tends to be greater when the amount of unemployment is high and smaller when the amount of unemployment is low. For example, in 2000 when the economy had low levels of unemployment, 45 percent of the unemployed had been unemployed for less than 5 weeks and 77 percent less than 15 weeks. Unemployment of any duration, of course, means a potential loss of output. This loss of current output is permanent; it is not made up when unemployment starts falling again.
Types of Unemployment Frictional unemployment is the temporary unemployment that results from the search time that occurs when people are searching for suitable jobs and firms are looking for suitable workers. People seeking work do not usually take the first job offered to them. Likewise, firms do not usually take the first person they interview. People and firms engage in a search to match up skills and interests. While the unemployed are looking, they are frictionally unemployed. 10.3
Reasons for Unemployment In many markets, prices adjust to the market equilibrium price and quantity, and no prolonged periods of shortage or surplus occur. However, in labor markets, obstacles prevent wages from adjusting and balancing the quantity of labor supplied and the quantity of labor demanded. 10.4
What is the historical record of changes in the overall U.S. price level? Consumer price index (CPI) is a measure of the trend in prices of a basket of consumable goods and services that serves to gauge inflation. The Price Level over the Years
Business activity, whether measured by production or by the sale of goods, tends to be high in the two months before the winter holidays and somewhat lower in summertime, when many families are on vacation. Within individual industries, of course, seasonal fluctuations in output often are extremely pronounced, agriculture being the best example. Seasonal Fluctuations Affect Economic Activity