Unemployment

Question 1

Define the term Labor Force

Answer 1

Labor force is anyone who is wiling and able to work for the growing rate, over the age of 16, not institutionalized who has actively searched for work at some point during the last 4 weeks.

Question 2

How do Economists define unemployment?

Answer 2

To be Unemployed one must be a member of the labor force but not have a job

Question 3

How does the BLS calculate Unemployment rate

Answer 3

The BLS calculates it through a survey of 60,000 household. The BLS Asks

1. How many non-institutionalized people over 16 live in the home
2. How many people have a paying job
3. How many have been actively searching for a job over the last 4 weeks

Question 4

Define the unemployment rate

Answer 4

The unemployment rate is the unemployed as a percentage of the total population.

Question 5

Explain the causes of each of the four categories of unemployment

Answer 5

• Seasonal Unemployment : people unemployed because their profession is off season
• Frictional Unemployment: a person that has just entered the workforce or is in between jobs. This typical searching is typically 3-6 months
• Structural Unemployment: occurs due to a miss match between the skills, experience and location of the workforce and the skills experience and location of the employer. There is never an exact matching of skills and demand. Someone structurally unemployed will generally find other employment
• Cyclical Unemployment: cyclical unemployment occurs when the economy is producing at less than full potential. for cyclical unemployment to reduce aggregate demand would need to increase.

Question 6

What is the natural rate of unemployment?

Answer 6

When GDP is at full potential all unemployment occurring will be the result of Seasonal, Structural or frictional unemployment. This would be the natural rate. Natural rate is estimated to be between 4.5% and 6.5% unemployment

Question 7

Understand how creative destruction contributes to structural unemployment.

Answer 7

Creative destruction contributes to because as new industries are created to replace old the required skills of the worker change. The labor force might have to be retrained or production might have moved to another part of the country.