Labor Force: Consists of unemployed and the employed.
Employed:
- Work at least 1 hour a month
- Temporarily absent from work
- Part time workers
Not in the Labor Force:
- Kids
- Full time students
- People in mental institutions
- People who are incarcerated
- Retirees
- Stay at home parents
- Military personnel
- Discouraged
Unemployment Rate Formula:
Number of unemployed X 100
Total Labor Force
Standard unemployment = 4-5%
Types of unemployment:
- Frictional Unemployment: Temporarily unemployed. Qualified w/transferable skills but they aren't working
- Seasonal Unemployment: This is a specific type of frictional unemployment, which is due to time of year and the nature of the job. These jobs will come back.
- Structural Unemployment: Changes in the structure of the labor force make some skills obsolete. Workers DON'T have transferable skills & these jobs will never come back. Workers must learn new skills. The permanent loss of these jobs is called "creative destruction".
- Cyclical Unemployment: Results from economic downturns (recession). As demand for goods & services falls demand for labor falls and workers are fired.
- ⅔ of unemployment are unavoidable: Frictional, Structural
- Together they make the NRU (natural rate of unemployment)
- We are at full employment if we only have 4–5% unemployment(NRU)
- Full employment means NO cynical unemployment.
- Okun’s law: When unemployment rises 1% above natural rate, GDP falls by about 2%
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