Transcript Economics Section 7

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 selfesteem, 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
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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
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Discouraged Workers
Dishonest Non-Workers
Frictional Unemployment
Structural Unemployment
Seasonal Unemployment
Cyclical Unemployment
Induced Unemployment