- Unemployment
imposes costs on individuals and nations. Unemployment exists when
people who are willing and able to work cannot find jobs. When unemployment
exists, an economy's production is less than potential GDP because
some resources are not being utilized. The labor force consists of
people age 16 or older who are employed or actively seeking work.
- The
unemployment rate is the percentage of the labor force that is willing
and able to work, does not currently have a job AND is actively looking
for work.
- The
unemployment rate is an imperfect measure of unemployment because
it does not: (1) include workers whose jobs prospects are so poor
that they are discouraged from seeking jobs; (2) reflect part-time
workers who are looking for full time work.
- Unemployment
rate differs for people of different ages, races, sexes. This reflects
differences in work experience, education, training and skills, as
well as discrimination.
- Unemployment
can be caused by people changing jobs (frictional), by seasonal fluctuations
in demand (seasonal), by changes in the skills needed by employers
(structural), or by cyclical fluctuations in the level of national
spending (cyclical).
- Full
employment means that the only unemployed people in the economy are
those who are changing jobs. (Most economists consider an unemployment
rate of 4-6% to be full employment.)
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