1. 4-Types of Unemployment & Full Employment Theory

2. Today’s Unemployment Rate
Labor Force: ,000,000
Unemployed Workers ,200,000
Unemployment Rate 4.7%
(7.2 / million) = 4.7% )

3. ‘

4. Unemployment By Education
Why go to college?
Unemployment By Education
Less Than High School: %
High School Graduate: %
Less Than a Bachelor’s %
College Graduate %

5. 4-Types of Unemployment
Structural
Skills do not match demand for labor
Cyclical
Too low a level of aggregate demand
Frictional
Temporarily between Jobs
Seasonal
Out of work based on time of year

6. Full Employment Full employment = 4%
allows for some frictional & structural
The lowest rate possible without causing inflation
In the long run, unemployment cannot fall below the full employment level

7. Which Unemployment?
Unemployment rate 4.5%. A trained plumber cannot find a job in his industry
A trained plumber cannot find a job in his industry during a recession
A golf instructor who works in Vermont has no work in December
A technology work was laid off and is currently looking for work
A stock market crash leads to a stock broker losing his job

8. Sample Problem: Fiscal Policy
Current Economy
AD1
AS1
Unemployment 3.0%
GDP +6.0%
Inflation rising
Price
Level
AD2
Real
GDP

9. Social Security Ads