Macroeconomics

‭●‬ ‭Cyclical‬ ‭Unemployment:‬ ‭Cyclical‬ ‭unemployment‬ ‭is‬ ‭closely‬ ‭tied‬ ‭to‬ ‭economic‬ ‭downturns‬ ‭.‬ ‭It‬ ‭occurs‬ ‭when‬ ‭there‬ ‭is‬ ‭a‬ ‭lack‬ ‭of‬‭demand‬‭for‬‭goods‬‭and‬‭services‬ ‭in‬‭the‬‭overall‬‭economy‬‭(i.e.,‬‭a‬ ‭decrease‬‭in‬‭total‬‭demand),‬‭leading‬‭businesses‬‭to‬‭reduce‬‭production‬‭and‬‭lay‬‭off‬‭workers.‬‭Cyclical‬ ‭unemployment‬ ‭is‬ ‭most‬ ‭prominent‬ ‭during‬ ‭recessions‬‭and‬‭economic‬‭contractions.‬ ‭It‬‭tends‬‭to‬ ‭rise‬ ‭during‬ ‭economic‬ ‭downturns‬ ‭and‬ ‭decrease‬ ‭during‬ ‭periods‬ ‭of‬ ‭economic‬‭growth.‬‭This‬‭is‬‭the‬ ‭most serious type of unemployment.‬ ‭●‬ ‭Frictional‬ ‭Unemployment:‬ ‭Frictional‬ ‭unemployment‬ ‭is‬ ‭temporary‬ ‭unemployment‬ ‭that‬ ‭arises‬ ‭from‬‭the‬‭normal‬‭process‬‭of‬ ‭workers‬‭moving‬‭between‬‭jobs‬ ‭.‬‭It‬‭occurs‬‭when‬‭individuals‬‭are‬‭in‬ ‭the‬ ‭process‬ ‭of‬ ‭transitioning‬ ‭from‬‭one‬‭job‬‭to‬‭another‬ ‭or‬‭when‬‭they‬‭enter‬‭the‬‭labor‬‭market‬‭for‬‭the‬ ‭frst‬ ‭time,‬ ‭such‬ ‭as‬ ‭recent‬ ‭graduates.‬ ‭Frictional‬ ‭unemployment‬ ‭is‬ ‭considered‬ ‭less‬ ‭concerning‬ ‭because it typically reflects individuals seeking better job opportunities or career advancements.‬ ‭○‬ ‭Seasonal‬ ‭Unemployment:‬ ‭Seasonal‬

‭unemployment‬‭results‬‭from‬ ‭fluctuations‬‭in‬ ‭demand‬ ‭for‬ ‭certain‬ ‭jobs‬ ‭or‬ ‭industries‬ ‭during‬ ‭specifc‬ ‭times‬ ‭of‬ ‭the‬ ‭year.‬ ‭For‬ ‭example,‬ ‭agricultural‬ ‭workers‬ ‭may‬ ‭experience‬ ‭seasonal‬‭unemployment‬‭during‬ ‭the‬ ‭off-season,‬ ‭or‬ ‭retail‬ ‭workers‬ ‭may‬ ‭face‬ ‭temporary‬ ‭job‬ ‭loss‬ ‭after‬ ‭the‬ ‭holiday‬ ‭shopping‬ ‭season.‬ ‭Seasonal‬ ‭unemployment‬ ‭is expected and often cyclical in nature.‬

‭Limitations of the Unemployment Rate‬

‭The BLS calculation of the unemployment rate is sometimes criticized due to the following reasons:‬

‭●‬ ‭Part-time‬‭workers‬‭are‬‭counted‬‭as‬‭full-time‬‭workers‬‭which‬‭understates‬‭the‬‭unemployment‬‭rate,‬ ‭since‬ ‭some‬ ‭people‬ ‭accept‬ ‭part-time‬ ‭jobs‬ ‭only‬ ‭because‬ ‭they‬ ‭cannot‬ ‭fnd‬ ‭full-time‬ ‭jobs.‬ ‭In‬ ‭practice, such groups are partly employed and partly unemployed.‬ ‭●‬ ‭People‬ ‭who‬ ‭give‬ ‭up‬ ‭looking‬ ‭for‬‭jobs‬‭after‬‭several‬‭failed‬‭attempts‬‭are‬‭classifed‬‭as‬‭discouraged‬ ‭job‬ ‭seekers‬ ‭who‬ ‭are‬ ‭then‬ ‭excluded‬ ‭from‬ ‭the‬ ‭labor‬ ‭force.‬ ‭This‬ ‭understates‬‭the‬‭unemployment‬ ‭rate.‬ ‭●‬ ‭People‬‭who‬‭are‬‭underemployed‬‭are‬‭not‬‭counted‬‭in‬‭the‬‭labor‬‭force.‬‭One‬‭is‬‭underemployed‬‭when‬ ‭one's‬ ‭skills‬ ‭and‬ ‭expertise‬ ‭are‬ ‭not‬ ‭fully‬ ‭challenged‬ ‭by‬ ‭one's‬ ‭job.‬ ‭This‬ ‭also‬ ‭understates‬ ‭the‬ ‭unemployment rate.‬ ‭Natural Rate of Unemployment‬ ‭The‬ ‭natural‬‭rate‬‭of‬‭unemployment‬‭(NRU)‬ ‭is‬‭the‬‭unemployment‬‭rate‬‭that‬‭occurs‬‭as‬ ‭a‬‭normal‬‭part‬‭of‬‭the‬ ‭functioning‬‭of‬‭the‬‭economy‬ ‭.‬ ‭Frictional‬‭and‬‭structural‬‭unemployment‬‭are‬‭unavoidable‬ ‭in‬‭an‬‭economy‬ ‭because‬ ‭there‬ ‭will‬ ‭always‬ ‭be‬‭people‬‭moving‬‭between‬‭jobs‬‭and‬‭a‬‭mismatch‬‭will‬‭keep‬‭existing‬‭between‬

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