Unemployment: Types and Causes

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Unemployment Types and Causes 1

Unemployment: Types and Causes

Labor Economics, EC 348, 10564
Dr. William Wilkes
December 7, 2011

Unemployment Types and Causes 2

Unemployment: The Types and Causes

The definition of unemployment given by the Bureau of Labor Statistics is; People who had no employment during the reference week and that were available for work at that time, they made efforts to find employment sometime during the four week period ending with the reference week. Unemployment has been a problem in the United States since the beginning of our economic structure. The current unemployment rate fell by 0.4 percentage point to 8.6 percent in November. “The number of unemployed persons at 13.3 million was down by 594,000 in November. The labor force, which is the sum of the unemployed and employed was down by a little more than half that amount.” (Trading Economics, 2011). There are many different types of unemployment. Frictional unemployment reflects the fact that it takes times for people to find and settle into new jobs. For example if 12 individuals each take one month before they start a new job, the unemployment statistics will record this as a single unemployed worker. Technological change will often reduce frictional unemployment. Another type of unemployment is structural; this type of unemployment reflects a mismatch between the skills and other attributes of the labor force and those demanded by employers. Natural rate of unemployment is the summation of frictional and structural Unemployment Types and Causes 3

unemployment. It is the lowest rate of unemployment that a stable economy can expect to achieve seeing as some frictional and structural unemployment is inevitable. Economist does not agree on the natural rate, with estimates ranging from 1% to 5%. The estimated rate varies from country to country and from time to time. Demand deficient unemployment is another example of unemployment. In Keynesian economics,...
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