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Unemployment
Frictional unemployment
Frictionally unemployed area temporarily without
Individuals who are ___________________
a job. Also called ______
search unemployment, frictionally unemployed
workers are “__________”
In-between jobs or “searching” for their ______
first jobs.
These unemployed workers have marketable (salable) skills, and it is
just a matter of time before they will find a job. This type of
unemployment is somewhat desirable in an economy because it
economic freedom of workers to change jobs to
reflects the _________________
improve their job status.
always be
Frictional unemployment is also inevitable. There will ________
people looking for work or changing jobs. During frictional
equals the number of
unemployment, the number of job seekers ________
jobs available (labor markets are in balance); they are just
temporarily mismatched.
Seasonal Unemployment
Seasonal
• __________
unemployment is a type
of frictional
unemployment that
occurs due to seasonal
changes.
• Migrant farm workers,
construction workers,
and ___________
Life guards are
workers who are often
seasonally unemployed.
• These individuals’ skills
are marketable (in
demand) only during
certain times of year.
Frictional unemployment
T a. It is also called search unemployment because
___
people are either “in between jobs” or looking for their
first jobs.
F b. It is lengthy in duration
___
T c. Skills of the unemployed are marketable.
___
F d. undesirable and unlikely to happen in our economy
___
___
T e. Jobs are available for job seekers; it is just a
temporary mismatch between job seekers and the jobs
available.
T f. Frictional unemployment includes those who are
___
seasonally unemployed – their skills are in demand only
at certain times of the year.
Structural Unemployment
•
•
•
Structural
____________ unemployment occurs as a result of changes
in particular industries or sectors of the economy. The
demand for labor is derived from the demand for products
in
produced by that labor; therefore, a _______________
Decrease
demand for a particular product may cause lay-offs in the
industry producing the good.
Foreign
Structural change may also occur as a result of __________
competition in an industry. The American automotive
industry and the steel industry have suffered losses in recent
foreign
competition.
decades due to successful ____________
Certain industries may also respond to technological change
in way that result in unemployment. Workers may lose their
jobs due to _____________,
automation such as being replaced by
computers or a robot. This type of structural unemployment
is sometimes called _______________
Technological unemployment.
Technological
Changes in
Unemployment
•
•
•
•
Technological change has also rendered certain products
obsolete such as slide rules being replaced by
________________.
calculators
Workers in the slide rule industry lost their jobs while jobs opened
up in the calculator industry. Unfortunately, for these structurally
unemployed workers, their skills may not be directly transferable
to the new jobs.
To obtain marketable skills needed in the new jobs, these workers
needed ________________
or further education.
Retraining
They might also have to relocate to a different geographic area,
such as moving from the Rust
_________ belt (northeast/mid-west) to
theSUN
_________ belt (southwest/west).
Structural Employment
• Structural unemployment may entail long term hardships
(i.e. when a large number of workers in an industry lose
their jobs it may be difficult or impossible to absorb them
into other industries, even with the best of times) for the
Worker
__________ involved; however, structural change is
inevitable in a dynamic and ____________
economy.
Growing
• Theoretically, during structural unemployment, the number
of workers looking for jobs is equal
__________ to the number of
new jobs opening up; it just takes long term retraining and
geographic relocation to match up workers with jobs.
• Unfortunately, the match does not always occur; thus,
structural unemployment entails serious
__________ economic and
noneconomic cost to the worker involved.
Structural Unemployment
T__ a. inevitable in a dynamic economy
T__ b. can result from a decrease in demand for a particular
product, thus causing lay –offs in the industry.
F__ c. is short-term and does not entail a serious hardships
for the unemployed worker.
T__ d. can and does result from stiff foreign competition.
T__ e. can result from technological change such as
automation.
T__ f. requires workers to get additional training or education
and/or to relocate geographically.
F__ g. is cause by the recession phase of the business
cycle.
F__ h. workers’ skills are directly transferable to new jobs.
Cyclical Unemployment
Cyclical unemployment occurs when there is
a deficiency in aggregate demand in the
economy. This type of unemployment is
Down-turns in the
associated with ____________
business cycle. During these recessions,
unemployment may be widespread and
_________ in duration.
Lengthy
Unfortunately, this type of unemployment
indicates a labor market out of balance: the
number of job seekers isgreater
_________ than
the number of jobs available.
Serious
Cyclical unemployment entails ___________
economic and no economic cost to society.
Cyclical Unemployment
F___ a. occurs when there is too much overall demand in
the economy.
T___ b. Occurs when there is not enough overall demand in
the economy to purchase the output that is produced.
T___ c. Occurs during recessions (downturns in the
business cycle)
T___ d. This type of unemployment is costly to society and
to the individuals involved.
F ___ e. During cyclical unemployment, plenty of jobs if
people look for them.
T___ f. During cyclical unemployment labor markets are not
in balance. There are more workers seeking
employment that jobs available.
Full employment
• Full employment in the U.S. economy does not
mean that 100% of the labor force is employed.
At any point in time, some individuals are inbetween jobs (frictional unemployment), just
entering the labor force (frictional
unemployment), or forced out of a job due to
technological or other change (structural
unemployment) in the industry.
Inevitable in a
• Because these changes are ___________
free economy and to some degree desirable, a
natural rate of unemployment exists. This natural
rate of unemployment consists of the amount of
frictional (including seasonal) and structural
(including technological) unemployment in the
4 to 6%
economy, usually representing __________of
the labor force.
Full Employment
• Full employment in the economy,
therefore, means that all
members of the labor force are
employed except for those that
are frictionally and structurally
unemployed.
• At the natural rate of
unemployment, labor markets
are theoretically in balance: job
Equals jobs available.
seekers _______
• Time (frictional), retraining
(structural) and/or relocation
(structural) are necessary to
match the job seekers with the
jobs available.
• When the unemployment rate
exceeds the 4-6% natural rate of
Cyclical
unemployment, __________
unemployment is occurring. The
economy is at less than full
employment during these
______________
Recessionary periods.
• Because of a deficiency in
aggregate demand, labor markets
are out of balance.
• Less than full employment or a
rate of unemployment greater
than the natural rate entails
Serious
economic and
____________
non economic costs to society,
especially in terms of lost output.
• At less than full employment,
there is a gap (called the GDP
gap) between the economy’s
potential output and its actual
output.
• This shortfall (potential output- actual
output) is called the GDP gap.
• Economist Arthur Okun states that for
1%
every _______increase
in
unemployment above the natural rate,
there is generated a 2.5 % GDP gap.
• This means that if the natural rate of
unemployment is 6% and the actual
rate of unemployment is 7%, 1 % of
cyclical unemployment exists.
• This 1% cyclical unemployment would
result in a 2.5% GDP gap. When the
economy is experiencing the cyclical
unemployment associated with a
recession, it is not fulfilling the
economic goals of
__________________and
Full Employment
Economic Growth
____________________
Multiple Choice
• A worker who loses his job at a petroleum
factory because consumers and business
firms switch from the use of oil to the
burning of coal is an example of:
B, Structural Unemployment
• A worker who quits one job and is taking
two weeks off before starting his new job
is an example of:
A, Frictional Unemployment
Multiple choice
• Insufficient aggregate demand results in:
C, Cyclical Unemployment
• The full-employment unemployment rate in
the economy has been achieved when:
C, Cyclical Unemployment is zero
• The labor force includes
D, unemployed
Multiple Choice
• If the actual rate of unemployment is 9%
and the natural rate is 6%, the GDP gap
is:
D, 7.5%
• If the GDP gap was equal to 10% of the
GDP, the actual unemployment rate would
exceed the natural rate by:
C, four percentage points