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Economics: Types of Unemployment


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About this Lesson

  • Type: Video Tutorial
  • Length: 4:18
  • Media: Video/mp4
  • Use: Watch Online & Download
  • Access Period: Unrestricted
  • Download: MP4 (iPod compatible)
  • Size: 46 MB
  • Posted: 03/29/2010

This lesson is part of the following series:

Economics: Full Course (269 lessons, $198.00)
Economics: Fluctuations: Unemployment & Inflation (18 lessons, $22.77)
Economics: Measuring Unemployment (5 lessons, $7.92)

In this economics video tutorial, we'll look specifically at types of unemployment. Taught by Professor Tomlinson, this lesson was selected from a broader, comprehensive course, Economics. This course and others are available from Thinkwell, Inc. The full course can be found at The full course covers economic thinking, markets, consumer choice, household behavior, production, costs, perfect competition, market models, resource markets, market failures, market outcomes, macroeconomics, macroeconomic measurements, economic fluctuations, unemployment, inflation, the aggregate expenditures model, banking, spending, saving, investing, aggregate demand and aggregate supply model, monetary policy, fiscal policy, productivity and growth, and international examples.

Steven Tomlinson teaches economics at the Acton School of Business in Austin, Texas. He graduated with highest honors from the University of Oklahoma and earned a Ph.D. in economics at Stanford University. Prof. Tomlinson's academic awards include the prestigious Texas Excellence Teaching Award given by the University of Texas Alumni Association and being named "Outstanding Core Faculty in the MBA Program" several times. He has developed several instructional guides and computerized educational programs for economics.

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Why are people unemployed? In this lesson, we will look at determinants of unemployment in our economy. What influences the unemployment rate? Let's start with the categories of unemployment.
First of all, there is the unemployment that results as people move between jobs. We call that frictional unemployment. It's the unemployment that's a sign of a healthy economy, one that's growing as people churn between one job and the next. A particular kind of frictional unemployment is seasonal unemployment, as people move between jobs that change with the seasons. Someone who works in an agricultural business in the summer may in the winter be unemployed but back in work in the summer. This is movement between jobs as part of changes in the seasons. Another kind of unemployment is related to long-term changes in the economy. We call it structural unemployment, and it results when whole industries die because of competition or technological change. Someone who has developed skills for a particular kind of manufacturing would be structurally unemployed when their industry leaves the economy altogether. The final kind of unemployment is cyclical unemployment. This is the unemployment that results from busts in the economic cycle. When the economy is growing, people are typically finding it easier to find jobs and more people are employed. But when the economy is in a downturn or a recession, there is more cyclical unemployment.
Let's look closer at cyclical unemployment and we can see that it's correlated very closely with the business cycle. In this diagram, we have looked at the unemployment rate and how it changes over time between 1970 and 2005 and beyond. In this picture, we have highlighted with these yellow bands the periods of recession when Gross Domestic Product was not growing at a positive rate. That is, the changes from one period to another were negative. And look what's happening to the unemployment rate during the recession of 1974/75, the recession of the early 1980s, in 1991, and again after 2000/2001. In each case, slowing of economic activity was correlated with spikes in the unemployment rates. And after the recessions ended, we typically saw increases in employment or a decrease in the unemployment rate. This is cyclical unemployment and it's typically the problem we are trying to address with economic policy that seeks to smooth out business cycles or address recessions when they occur.
A final consideration is how unemployment rates vary across age, race, and gender. We have broken the unemployment data out here the way it's frequently broken out by the BLS to see what kind of patterns we can notice. The first is that unemployment rates vary relatively little according to gender. No matter which group you are looking at, males and females have unemployment rates that are very close to each other. We notice however this is not the case for ethnic groups. The ethnic groups all seem to have different, distinct unemployment rates. And this is a cause for curiosity and we wonder: Why does this happen and what kind of policies might help address these gaps. That gap, though, was relatively small compared to the gap that exists between teenagers and other workers. Teenagers typically have relatively high rates of unemployment and minority teenagers the highest in the economy. Again, we wonder why this is happening and what kind of policy measures might help to bring these unemployment rates in line with those in the rest of the economy.
The unemployment rate is one simple number that covers up a more complex story about why people who are looking for work aren't able to get it. Knowing how that number is calculated is the first step to understanding it. Beyond that, there are more questions: What kind of unemployment are we talking about? What does it tell us about the business cycle or longer-term changes in the economy? And finally, who is unemployed and what might our economy, our society do to support them?
Economic Fluctuations: Unemployment and Inflation
Measuring Unemployment
Types of Unemployment Page [1 of 1]

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