Unemployment rate

Unemployment rate

The unemployment rate measures the percentage of the total civilian labor force that is currently unemployed. The civilian labor force consists of all civilians, 16 years of age or older:

Who work for pay, either for someone else or their own business, for one or more week

Who works without pay for 15 hours a week in a family business

Who has job but has been temporarily absent, with or without pay

The number of people unemployed is determined according to certain criteria. Furthermore, an unemployed worker must have been actively searching for work during the past month. Workers, who are not actively searching for work, referred to as discouraged workers, are not considered a part of the civilian labor force and therefore are not counted among the unemployed.

Types of Unemployment

Frictional unemployment

Frictional unemployment is the term used to describe unemployment that results from difficulties in matching qualified workers with new jobs. Many qualified workers seeking work are not able to find new jobs right away, usually because of a lack of complete information about new job openings. While it is likely that qualified workers will soon be matched with new jobs, these workers are considered frictionally unemployed during the time that they spend searching for their new jobs.

Structural unemployment

Structural unemployment results from structural changes in the economies that cause workers to lose jobs. The same structural changes also prevent these workers from obtaining new jobs. Structurally unemployed workers are not qualified for the new job openings that are available, mainly because they lack the education or training needed for the new jobs. Consequently, the structurally unemployed tend to be out of work for long periods of time, usually until they learn the skills needed for the new jobs or until they decide to relocate.

Classical Unemployment

Classical unemployment is also known as the real wage unemployment or disequilibrium unemployment. This type of unemployment occurs when trade unions and labor organization bargain for higher wages, which leads to fall in the demand for labor.

Cyclical Unemployment

Unemployment that is attributed to economic contraction is called cyclical unemployment. The economy has the capacity to create jobs which increases economic growth. Therefore, an expanding economy typically has lower levels of unemployment. Cyclic unemployment when there is a recession. When there is a downturn in an economy, the aggregate demand for goods and services decreases and demand for labor decreases. At the time of recession, unskilled and surplus labors become unemployed. When this happens there are more unemployed workers than job openings due to the breakdown of the economy. This type of unemployment is heavily concentrated on the activity in the economy.

Seasonal Unemployment

A type of unemployment that occurs due to the seasonal nature of the job is known as seasonal unemployment. The industries that are affected by seasonal unemployment are hospitality and tourism industries and also the fruit picking and catering industries.

Natural rate of Unemployment (NRU)

The natural rate of unemployment refers to the unemployment that occurs as a normal part of the functioning of the economy. The natural rate of unemployment is determined by looking at the rate people are finding jobs, compared with the rate of job separation, for example people quitting. In any given period, people are either employed or unemployed. As a result, the sum of structural and frictional unemployment is referred to as the natural rate of unemployment also called "full employment" unemployment rate. This is the average level of unemployment that is expected to prevail in an economy and in the absence of cyclical unemployment.

Cost of unemployment

Personal cost

Social cost

Economic cost

Political cost