Unemployment occurs when people who are willing and able to work are unable to find suitable jobs. The documents define key terms related to unemployment such as labor force, employed, and unemployed individuals. It also discusses different types of unemployment including frictional, structural, cyclical, seasonal, and hidden unemployment. The effects of unemployment are explored at the individual, social, and economic levels. Finally, expansionary fiscal and monetary policies are outlined as measures to help reduce unemployment.

1. UNEMPLOYMENT

2. UNEMPLOYMENT
 Unemployment – people who are willing and able to work but unable to find
suitable jobs
 Total labor force – number of workers who are employed and unemployed (only
those who are actively seeking for jobs).
2
Unemployment Rate = Number of unemployed
Total labor force
X 100%
Number of unemployed = Number of employedTotal labor force -
Labor force participation Rate = Total labor force
Adult population
X 100%

3. CONCEPT OF LABOR FORCE AND
UNEMPLOYMENT
LABOR FORCE
those who were in the 15-64 years age group and who
were either employed or unemployed
EMPLOYED
labor force who at any time during reference week,
worked at least one hour for pay, profit or family gained
UNEMPLOYED
labor force who were unemployed but actively or
inactively looking for work

4. Labour Force, Unemployment and Employment

5. Comparison of Employment between countries

6. •People made redundantPeople made redundant
•People sackedPeople sacked
•People temporarily laid offPeople temporarily laid off
•People resigningPeople resigning
UNEMPLOYMENTUNEMPLOYMENT
OUTFLOWSOUTFLOWS
(per period of time)(per period of time)
To jobsTo jobs To outside theTo outside the
labour forcelabour force
•People taking new jobsPeople taking new jobs
•People returning to oldPeople returning to old
jobs who had beenjobs who had been
temporarily laid offtemporarily laid off
•People who have become disheartenedPeople who have become disheartened
and give up looking for a joband give up looking for a job
•People who have reached retirement agePeople who have reached retirement age
•People who temporarily withdraw fromPeople who temporarily withdraw from
labour force (e.g. to raise a family)labour force (e.g. to raise a family)
•People who emigratePeople who emigrate
•People who diePeople who die
INFLOWSINFLOWS
(per period of time)(per period of time)
From jobsFrom jobs From outside the labour forceFrom outside the labour force
•School/college leaversSchool/college leavers
•People returning to thePeople returning to the
labour force (e.g. afterlabour force (e.g. after
raising children)raising children)
Flows into and out of unemployment

7. Arnold Economics, 5e / Ch. 5
Macroeconomic Measurements,
7
Exhibit 5 Breakdown of the U.S. Population and
the Labor Force
SOURCE: U.S. Department of Labor, Bureau of Labor Statistics.

8. Types and Causes of Unemployment
Residual Unemployment
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment
Hidden/Disguised Unemployment
Seasonal Unemployment

9. TYPES OF UNEMPLOYMENT
9
Frictional / Normal
Structural
Cyclical
Seasonal
Hidden
Technological
Temporary UE, just graduate and start
searching for a job, temporarily UE in limited
period of time
Occurs when there is change in the structure
of economy, skills workers are no longer
suitable with the jobs
Caused by decrease in AD due to change in
business cycle
Occurs when certain product cannot be
produce during that season
Caused by a change in technology, such as
improvement in the techniques of productions
Failure to achieve full employment or to
produce the max amount of goods that can be
produced by labor

10. Effects of unemployment
Individual Effects
low self-esteem, useless and burden to the family
and society
Social Effects
crime rate increase, homicide, family split up,poverty
increase
Economic Effects
loss of output and income, lower economic growth

11. Measures to reduce Unemployment
EXPANSIONARY FISCAL POLICY
 Reduce tax
 Increase government expenditure
 Increase transfer payment
EXPANSIONARY MONETARY POLICY
 Increase money supply
 Reduce interest rate
 Reduce reserve requirements
 Buy government securities in the open market