Unemployment Section 7- How unemployment influences our economy.

The President’s Council of Economic Advisors measures unemployment  Persons are classified as unemployed if they were not employed during the survey week, but were available for work and had made a specific effort to find a job at the same time within the preceding four weeks, or if they were waiting either to report to a new job within 30 days or be recalled to a job from which they were laid off.

Department of Labor  The Department of Labor’s data collection is reasonably reliable but is not completely accurate because of two distinct groups  Discouraged Workers  Dishonest Non-Workers

Discouraged Workers  Discouraged workers are individuals who would love to go back to work, but due to the length of time being unemployed, low self- esteem, many job applications rejections, or just bad luck, they have given up on looking for a new job. These individuals are beyond the four-week cutoff for counting them as unemployed, thus the real rate of unemployment is underestimated.

Dishonest Non-Workers  Dishonest non-workers are individuals who say they are looking for employment, thus being eligible for employment compensation, although they have no real intention of taking a new job. Therefore, because of this group, the real rate of unemployment is overestimated.

Class Discussion Why & when (under what circumstances) would the sizes of these groups be larger or smaller

Unemployment: Basic Classifications  Frictional Unemployment  Structural Unemployment  Seasonal Unemployment  Cyclical Unemployment  Induced Unemployment

Frictional  When unemployment happens naturally. That is, there are some people who quit their jobs because they do not like them, and some people seek to re-enter the job market. Like mothers after leaving a job to have children.

Structural When the skills of the potential employee no longer match the needs of the potential employers. Technological changes may have made an employee’s skills & talents obsolete. Can you think of any situations?

Seasonal Some products or businesses are in demand during only part of the year. When business is not being conducted, the demand for employees drops considerably. The construction business in the northern states and agricultural harvesting in many states are good examples.

Cyclical There is a seemingly natural cycle of good economic times and poor times. During these poor times of recession or depression, businesses decrease their outputs, which requires fewer employees, thus causing an increase in unemployment.

Induced Caused by government policy. A prime example is the national minimum wage law. The minimum law prevents businesses from hiring workers who would otherwise work for less pay than the government law requires.

REVIEW  Discouraged Workers  Dishonest Non-Workers  Frictional Unemployment  Structural Unemployment  Seasonal Unemployment  Cyclical Unemployment  Induced Unemployment