How is the unemployment rate calculated? Describe the three principal types of unemployment.

Question

What will be an ideal response?

Answer 1

The unemployment rate is a percentage obtained by dividing the number of persons classified as unemployed by the number of persons in the labor force. Unemployed persons are those individuals who are out of work and actively looking for work. The labor force is the sum of those counted as unemployed and those persons counted as employed. Employed persons are those at work, full- or part-time, during the week in which the employment survey data are collected by the Department of Labor.The three principal types of unemployment are frictional, structural, and cyclical unemployment. Frictional unemployment occurs when persons are between jobs. Workers may be between jobs because they have quit one job and are searching for something more suitable, or because they are moving to a different region of the country, or they are moving from a declining industry to a growing industry. Structural unemployment is sometimes referred to as long-term unemployment or technological unemployment. Structurally unemployed workers have skills that are outdated or were working in jobs that are now done by some type of automated machinery. These unemployed workers may need retraining or additional education to prepare themselves for new careers. Structural unemployment is particularly difficult for older workers who may not have sufficient time to learn new skills before they reach retirement age. Cyclical unemployment is often referred to as a recession unemployment and is a focus of macroeconomic theory. Cyclical unemployment is created when the economy is not producing at its potential level of GDP. Government aggregate demand management policies are often effective in reducing cyclical unemployment.