6.02 Understand economic indicators to recognize economic trends and conditions C Discuss the impact of a nation’s unemployment rates Understand economics trends and communication.

C Define Unemployment rate: – The proportion of the civilian labor force 16 years or older that is actively seeking employment, but is unemployed and not engaged in the production of goods and services. The unemployment rate is estimated and reported monthly by the Bureau of Labor Statistics of the U.S. Department of Labor. It is used not only as the prime measure of labor unemployment in the economy, but also as a key indicator of business-cycle instability.

Define: Frictional unemployment: – Unemployment attributable to the time required to match production activities with qualified resources. Frictional unemployment essentially occurs because resources, especially labor, are in the process of moving from one production activity to another. Structural unemployment: – Unemployment caused by a mismatch between workers' skills and the skills needed for available jobs. Structural unemployment essentially occurs because resources, especially labor, are configured (trained) for a given technology but the economy demands goods and services using another technology.

Define: Cyclical unemployment: – Unemployment attributable to a general decline in macroeconomic activity, especially expenditures on gross domestic product, that occurs during a business-cycle contraction. Seasonal unemployment: Unemployment attributable to relatively regular and predictable declines in particular industries or occupations over the course of a year, often corresponding with the climatic seasons.

Technological unemployment: Unemployment caused by technological changes or new methods of production in an industry or business and results in less jobs. Full employment: The state that occurs when all of the economy's resources are engaged in the production of output. In practice, an economy is considered to be at full employment when the unemployment rate is around 5 to 5 1/2 percent and the capacity utilization rate of capital is about 85 percent. This is one of the five economic goals and three macroeconomic goals. DEFINE:

Unemployment Discuss individual costs of unemployment. – it destroys marriages – it leads to depression – drug abuse – even suicide Describe economic benefits of unemployment. – Averts runaway inflation – Reduces wages/salaries – Maintains higher productivity of current workers

Explain theories of the causes of unemployment. – Keynesian theory (of macroeconomics) explained by the renowned British economist John Maynard Keynes. This theory states that, unemployment is resulted from increase in demand rates while the economy operates below its growth rate and potential output. Henceforth, the economy faces a great blow under this circumstance.

Causes of Unemployment Economic Inflation Economic Recession Welfare Payments Changing Technology Job Dissatisfaction Employee Values Racial Discrimination

Unemployment Explain why the unemployment rate understates employment conditions. – Doesn’t show the number of long-term unemployed or those without jobs for more than six months – Doesn’t talk about the number of those working part time but wanting to work full time – Doesn’t mention that the number of new entrants into the unemployment ranks rose sharply last month

Cost of Unemployment Describe the costs of unemployment for a nation. – Unemployment causes a waste of scarce economic resources and reduces the long run growth potential of the economy. High unemployment has an impact on government expenditure, taxation and the level of government borrowing each year – An increase in unemployment results in higher benefit payments and lower tax revenues. When individuals are unemployed, not only do they receive benefits but also pay no income tax. – As they are spending less they contribute less to the government in indirect taxes. – This rise in government spending along with the fall in tax revenues may result in a higher government borrowing requirement (known as a public sector net cash requirement)