1. Economic Challenges

2. Types of Unemployment
Frictional- time required to bring labor and employer together
Structural-job seekers don’t have skills demanded
Seasonal- unemployment caused by seasonal change
Cyclical- increase in unemployment due to recession
Full Employment- no cyclical unemployment, 5-6% unemployed

3. Unemployment estimates
Problems with Official Unemployment estimates
Discouraged workers- not counted in unemployment
Underemployment- people in part time jobs, or overqualified
Underground economy- under table

4. The Cost and measure of Unemployment
Unemployment rate-people without jobs looking for work
number in labor force
Labor force- those in labor force or looking for work
Unemployment for various groups

5. Unemployment benefits
Paid if you lost job –average $310 a week
Must be searching for work
not from quitting or being justly fired

6. Inflation Basics Inflation- increase in economy's average price level
Types of Inflation
Hyperinflation- high inflation
Disinflation- reduce rate of inflation
Deflation- decrease in price level
Reduces the value of currency

7. Economic Instability-pre great depression
Adam Smith
Wealth of Nation 1776
Laissez-faire
Hands off economics- government should not intervene
Invisible hand of the economy
Economy self correcting

8. Economic Instability- Great Depression to 1970s
John Maynard Keynes
The General Theory of Employment, Interest, and Money 1936
Investment decisions guided by “animal spirit”
Government shock economy out of depression
Achieved by government increasing spending and/or cutting taxes to stimulate consumption and investment
Both could cause deficit
Stop doing these once economy back to normal
Demand side economics

10. Economic Instability- 1981-2007
Supply side economics
Cutting tax rates to stimulate supply side
Federal deficit
Taxes raised deficit reduced
Surplus 1998

11. Economic Instability
Stimulus 2008
Stimulus packages

12. Poverty and the Economy
Poverty and Jobs
No workers in family increase chance
Single mothers 14times greater chance
Poverty and unemployment
Lower unemployment rate, lower poverty rate

13. Unplanned Results of Income assistance
Children largest group in poverty
Why work?
Assistance only given to poor
Assistance taken away as earnings increase ( at a 1 to 1 scale)
Also taxes when working for money
Long-Term dependency
Skills weaken the longer one is out of work
Cycle of poverty
Children in welfare families grow up and end up being on welfare themselves
Viewed sometimes as normal way of life (but other reasons can lead to this also)

14. Welfare Reforms Overhaul of welfare system 1996
Lifetime limit of 5 years per recipient
Must participate in training/ educational program
Must search for work or take unpaid position
Retain some benefits to transition off of it (increase incentive)
Earned income tax credit
Welfare recipients fell from 5.5% in 1994 to 1.4% in 2010