Macroeconomics

Workers who are considered to be unemployed are not working, but they are actively looking for a job. The unemployment rate is the percent of people in the labor force who want a job but are not working.

• Unemployment rate = number of employed/number in the labor force × 100

The labor force is the number of people age 16 and over who are willing and able to work. Jobless people who are not looking for work (such as stay-at-home parents and students) are not included in the labor force. The labor force participation rate is the percent of the population in the labor force.

There are three types of unemployment. Frictional unemployment is the first type. In this type, workers have transferable skills. Unemployment is temporary, or workers are between jobs. Seasonal unemployment is a type of frictional unemployment caused by the time of year and nature of the job.

The second type of unemployment is structural unemployment. In this type, workers’ skills are obsolete because of changes in the labor market. Workers had jobs that will never come back. They do not have transferable skills, and they must learn new skills to get a job. Technological unemployment is a type of structural unemployment in which workers are replaced by automation and machinery.

Cyclical unemployment is the third type of unemployment, and it occurs during periods of recession. Demand for goods and services falls as economic growth falls. Because consumers are purchasing fewer goods and services, demand for labor falls and workers are laid off.

The goal is not to have zero unemployment in a good economy. There will always be frictional and structural unemployment, regardless of the health of the economy. This is referred to as the natural rate of unemployment (NRU).