Types Of Unemployment
November 23, 2008 – 5:04 amThe reliability of the unemployment rate calculation is regularly debated, so I thought it might be interesting to figure out how this highly publicized number is generated. After research this topic I believe the following represent the key points:
- The unemployment rate is number of jobless people divided by the total labor force
- The total labor force includes all people 16 or older who work as well as those looking for work
- Economists distinguish between four types of unemployment
- Cyclical Unemployment: which varies due to business cycles
- Frictional Unemployment: also called “search unemployment”, this group includes people looking for new jobs or who are in transition between jobsStructural Unemployment: involves a mismatch between vacancies and sufficiently skilled workers to fill those vacancies
- Classical Unemployment: this occurs when real wages are higher than the market equilibrium wage. This is a different than the situation with Cyclical Unemployment, because in that case an aggregate demand failure is the primary cause of unemployment.
- The number of unemployed individuals is conducted via survey, and therefore the results may reflect some discrepancies.
The chart below was generated for all unemployed persons age 16 or older as determined by the Bureau of Labor Statistics. The second chart is unemployment by month.
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2 Responses to “Types Of Unemployment”
Re: The unemployment rate is number of jobless people divided by the total labor force
This is just a false statement. Millions of jobless people are not counted in the official statistics.
By poor boomer on Nov 23, 2008
That’s true. You have to be actively seeking employment to be considered in the official statistics, and there are numerous other reasons why people argue that the official numbers are inaccurate. I tend to view the published reports as the low end of the estimated range.
By todd on Nov 23, 2008