Chances are that, when a graduating college student begins to look for a job, he or she will be more likely to surf the Internet in search of employment than to look in the help wanted ads in the local papers. Large Internet firms now specialize in posting job vacancies and collecting resumes for prospective employees. Information about jobs all over the country are available online. The Internet has certainly reduced the costs associated with seeking employment. But could the Internet solve all our unemployment problems? Let’s suppose the following: Every employer posted every job vacancy on the Internet, and everyone seeking a job posted his or qualifications on the Internet. Private firms, or perhaps a government agency, organized these postings by geographical area and the type of job. Would information made available in this way reduce unemployment to zero? Would this really work? One of the reasons we want to avoid poor economic performance is that it imposes costs on individuals and society. If the economy fails to create enough jobs, many individuals will not find work, causing hardship for them and their families. Recall from Chapter 5 that one of the key issues for macroeconomics is understanding economic fluctuations—the ups and downs of the economy. During periods of poor economic performance, such as economic recessions when real GDP declines, unemployment rises sharply and becomes a cause of public concern. During times of good economic performance and rapid economic growth, unemployment is reduced but does not disappear. Our first task is to understand how economists and government statisticians measure unemployment and then learn to interpret what they measure.
LET’S BEGIN WITH SOME DEFINITIONS.
The unemployed are those individuals who do not currently have a job but who are actively looking for work. The phrase actively looking is critical. Individuals who looked for work in the past but are not looking currently are not...