04 UNDERSTANDING ECONOMICS: UNEMPLOYMENT

the best example of a “frictionally unemployed” worker is one who:
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unemployment unemployment is defined as people who are willing and able to work but do not currently have a job to be counted as employed a person must be working even if only part-time or be absent from work due to illness vacation or a labor dispute because part-time jobs are counted as employed people who take part-time jobs while looking for full-time employment are classified as employed to be counted as unemployed a person cannot have a job of any kind and must be actively looking for work because of the benefits people will sometimes declare themselves as unemployed who are not actually looking for any work all persons over the age of 16 that do not have a job and are not seeking one are declared as not in the labor force as you can see the employment numbers can be a bit misleading because some people are declared employed who are still looking for full-time work some people are declared unemployed who are not really seeking work but still want to collect the benefits and some people are declared not in the labor force because there were no jobs available so they simply gave up looking for work unemployment statistics are reported by the Department of Labor there

are several unemployment reports from the Department of Labor as well as other sources that we will cover in the section on economic data frictional unemployment people are frictional e unemployed when they are in between jobs are seeking work for the first time because there will always be a certain number of people changing jobs or a certain number of people seeking work for the first time there will always be a certain level of frictional unemployment therefore full employment means theres still an acceptable level of unemployment in the country this is sometimes referred to as an ideal employment level there is some debate on the acceptable level of unemployment to be considered full employment for example Lord William Beveridge defined full employment as where the number of unemployed workers equal the number of job vacancies available however most economists agree that a level of unemployment around four to five percent should be considered full employment cyclical unemployment cyclical unemployment also known as demand deficient unemployment comes from fluctuations in the business cycle the business cycle is named for the stages an economy goes through a business cycle generally has four parts growth prosperity decline and recession eventually a recession will always be followed by expansion and expansion will

always be followed by recession the full loop of going from recession to growth and back to recession again is called the business cycle cyclical unemployment comes from the periods of decline and recession in the business cycle structural unemployment structural unemployment happens when unemployed workers are unable to fill job openings due to skill mismatch or geographical mismatch structural unemployment due to skill mismatch occurs when available workers do not have the skills needed to perform available jobs structural unemployment due to geographical mismatch occurs when available jobs are not located near available workers seasonal unemployment seasonal unemployment occurs when people have jobs for part of the year but are unemployed part of the year due to seasonal factors an example might be construction or farm workers who are out of work because of cold weather there will always be some unemployment because it will always be a certain number of people in the process of changing jobs there will always be a certain number of people on personal unemployment however there are a certain number of things that can be done to minimize unemployment in general one of these tools is fiscal policy fiscal policy is defined as used in the governments taxing and spending powers to influence the

economy fiscal policy can be used to combat cyclical unemployment which is caused by a decrease in total spending from the country being in or heading into a recession because less things are being purchased workers get laid off due to decreases in production if spending can be increased these workers would get called back to work to produce the additional needed goods one way fiscal policy can be used to create jobs would be to cut taxes this means people would have more money left over to spend and companies would have more money to hire new employees another example fiscal policy could be used as if the government started a public works program to build new buildings or bridges another way the government can fight unemployment is use a monetary policy monetary policy involves changing interest rates to affect the economy by lowering rates money now cost less to borrow making it cheaper for companies to expand and cheaper for consumers to buy goods therell be a lot more on fiscal and monetary policy in future videos so that covers a basic overview of unemployment in our next video Ill cover a problem that many economists say will be a growing problem in the future inflation meantime happy trading you

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