Unemployment

Unemployment is the state of an individual looking for a paying job but not having one. Unemployment does not include children, the retired, full-time students, and people not actively looking for a job. Frictional unemployment is unemployment that comes from people moving between jobs, careers, and locations. Cyclical unemployment occurs when the unemployment rate moves in the opposite direction of the GDP growth rate. This means that when the GDP growth rate is low or negative unemployment is high. Structural unemployment is an unemployment that comes from there being an absence of demand for the workers that are available. The natural unemployment rate is the healthy unemployment rate that will always occur in an economy, unless it is overheated. Unemployment results from frictional unemployment that results from job turn over, structural unemployment that is caused by a mis-match between job skills and job availablitiy, and unemployment caused by minimum wage laws and labor unions.


According to Okun's Law, there is an empirical relationship between unemployment and percentage growth of real out put, as measured by GNP. Arthur Okun estimated the relationship between unemployment and percentage growth out put was:

• Yt = - 0.4 (Xt - 2.5 )
  This can also be expressed as a more traditional linear regression as:
  Yt = 1 - 0.4 Xt Yt is the change inthe unemployment rate in percentage points. Xt is the percentage growth rate in real output, as measured by real GNP.
  

Labor force participation rate is the percentage of working-age persons in an economy who are employed or unemployed and looking for a job. Persons between ages 16 and 64 are typically considered of working-age. People between 16 and 64 who are students, retired, and homemakers are not counted. The labor force in the U.S. is around 67-68 percent.