What is Unemployement?



Image result for unemployment Unemployment is the macroeconomic problem that affects people most directly and severely. For most people, the loss of a job means a reduced living standard and psychological distress. It is no surprise that unem-ployment is a frequent topic of political debate and that politicians often claim that their proposed policies would help create jobs.

Job Search and Frictional Unemployment
One reason for unemployment is that it takes time to match workers and jobs.
workers have different preferences and abilities, and jobs have different
attributes. Furthermore, the flow of information about job candidates and job
vacancies is imperfect, and the geographic mobility of workers is not instantaneous.
For all these reasons, searching for an appropriate job takes time and effort, and this tends to reduce the rate of job finding. Indeed, because different jobs require different skills and pay different wages, unemployed workers may not accept the first job offer they receive. The unemployment caused by the time it takes workers to search for a job is called frictional unemployment.

Causes of Frictional Unemployment
Some frictional unemployment is inevitable in a changing economy. For many reasons, the types of goods that firms and households demand vary over time. As the demand for goods shifts, so does the demand for the labor that produces those goods. Economists call a change in the composition of demand among industries or regions a sectoral shift. Because sectoral shifts are always occurring, and because it takes time for workers to change sectors, there is always frictional unemployment

Structural Unemployment
Structural unemployment is one of the main types of unemployment within an economic system. It focuses on the structural problems within an economy and inefficiencies in labor markets. Structural unemployment occurs when a labor market is not able to provide jobs for everyone who is seeking employment. There is a mismatch between the skills of the unemployed workers and the skills needed for the jobs that are available. It is often impacted by persistent cyclical unemployment. For example, when an economy experiences long-term unemployment individuals become frustrated and their skills become obsolete. As a result, when the economy recovers they may not fit the requirements of new jobs due to their inactivity .

Two Causes of Structural Unemployment

Structural unemployment is neither voluntary nor short-term. These next two causes usually lead to long-term unemployment. 
The fifth cause is advances in technology. That's when computers or robots replace workers. Most of these workers need more training before they can get a new job in their field.
The sixth cause is job outsourcing. That's when a company moves its manufacturing or call centers to another country. Labor costs are cheaper in countries with a lower cost of living. That occurred in many states after NAFTA was signed in 1994. Many manufacturing jobs moved to Mexico. It also occurred once workers in China and India gained the skills needed by American companies. 

Cyclical Unemployment

Cyclical unemployment is a type of unemployment that occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work. In an economy, demand for most goods falls, less production is needed, and less workers are needed. With cyclical unemployment the number of unemployed workers is greater that the number of job vacancies.

What Causes Cyclical Unemployment?

The seventh reason for unemployment is when are fewer jobs than applicants. The technical term is demand-deficient unemployment. When it happens during the recession phase of the business cycle, it's called cyclical unemployment. 
Low consumer demand creates cyclical unemployment. Companies lose too much profit when demand fall. If they don't expect sales to pick up anytime soon, they must lay off workers.
The higher unemployment causes consumer demand to drop even more, which is why it’s cyclical. It results in large-scale unemployment. Examples include the financial crisis of 2008 and the Great Depression of 1929

The Natural Unemployment Rate

The natural unemployment rate, sometimes called the structural unemployment rate, was developed by Friedman and Phelps in the 1960s. It represents the hypothetical unemployment rate that is consistent with aggregate production being at a long-run level. The natural rate of unemployment is a combination of structural and frictional unemployment. It is present in an efficient and expanding economy when labor and resource markets are at equilibrium. The natural unemployment rate occurs within an economy when disturbances are not present.

Book: MACROCONOMICS by Mankiw
https://www.thebalance.com/causes-of-unemployment-7-main-reasons-3305596

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