Unemployment refers to a situation whereby a person who is able and willing to work is currently without a job. The total number of employed people plus the number of unemployed persons who are seeking work is referred to as labor force (US Bureau of Labour Statistics, 2010). The participation rate is the labor force divided by the total number of working age population that is not institutionalized (US Department of Labour, 2010).
The unemployment level is the difference between the labor force and the total number of people who are currently employed.
The unemployment rate is the level of unemployed divided by the total number of working population. There are different types of unemployment types in the overall macro-economy. They include frictional unemployment, structural unemployment, natural rate of unemployment and demand deficient unemployment.
Frictional unemployment reflects the time taken by individuals to find and get settled in their new jobs. Structural unemployment is the difference between the skills and other attributes possessed by the labor force and what the employers actually demand.
This type of unemployment considers employees who are undergoing re-training in order to start a new job as being unemployed. It is usually increased by technological changes. Natural rate of unemployment is the sum total of frictional and structural unemployment.
It is considered to be the lowest rate of unemployment that is expected to be achieved by a stable economy. Demand deficient unemployment is the level of unemployment which is beyond the natural rate unemployment. Causes of unemployment According to Keynesian economics, unemployment results from deficit in effective demand for both goods and services in an economy (US Bureau of Labour Statistics, 2010). Other schools of thought attribute unemployment to structural problems and inefficiencies which are common in the labor markets.
Classical economics attribute unemployment to rigidities in labor markets resulting from external environment such as unionization of workers, taxes, minimum wages and other factors that may limit hiring of new employees (US Department of Labour, 2010). Other economists view unemployment as a voluntary choice of the unemployed and the time it takes them to find a new job also referred to as frictional unemployment. Efficiency wages and sticky wages are seen by behavioral economists to be a cause of unemployment.
Unemployment level in US Unemployment in 27 US states was reported to have increased in February 2010 while seven states reported a drop in unemployment. There was an increase in unemployment in the state of Mississippi by 0. 4 percent (highest increase). The unemployment in Detroit fell from 15. 3 to 14. 8. The unemployment nationally by February 2010 was reported by Labor Department to be 9. 7 percent. However, job layoffs were fewer than previously anticipated (Trading Economics, 2010).
Since the onset of recession in December 2007, 8. 4 million jobs had been lost by March 2010. The US official unemployment was reported to be 9. 5% in June 2010. This accounted for about 14. 6 million unemployed Americans. The black teens were leading with unemployment of 39. 9% Asians had the lowest unemployment rate of 7. 7%. The total number of officially unemployed and the hidden unemployment (29. 1 million) account for 18. 2% of the labor force. The graph below illustrates the levels of unemployment in US between 1999 and 2009.