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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