Economic Challenges 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 full- time 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