Unemployment

Marginally attached workers

Workers out of the labor force, but who have looked for a job in the past year.

Discouraged workers

Those currently without a job who have given up looking for a job only because they believe there are no suitable opportunities available. Subset of those out of the labor force. A subset of marginally attached workers.

Frictional unemployment

Unemployment due to temporary factors, such as moving, switching jobs or graduating school.

Structural unemployment

Unemployment resulting from fundamental shifts in the economy, such as skills mismatch or not being able to move where jobs are located.

Cyclical unemployment

Unemployment resulting from changes in demand for workers due to the business cycle ::

Frictional unemployment can be summarized as not currently having a job, but expecting to find one soon. Frictional unemployment would only be zero in a command economy with guaranteed employment. In market-based economies, it is always positive. Anything that speeds up the job search process can make it go down. A past example of this is the introduction of internet job boards at the turn of the century and a current one could be the development of AI job matching tools.

Similarly, structural unemployment is not having a job and having skills or being in a field where it is difficult to find a job where you currently are. So those who are structurally unemployed you may need additional training, education or to move to find a job again. This can rise and fall over decades, due to changes in technology, education, and job training.

Cyclical unemployment stems from business cycles. During recessions labor demand is weaker and unemployment rates rise. During expansions, labor demand is often stronger and unemployment rates fall. A notable exception to these patterns is the recovery following the recession of 2000, when GDP growth returned but unemployment continued to rise for a few years after.

These divisions of unemployment enable us to provide one more definition that will have more importance later on.

$$\begin{array}{r}\text{Natural rate of unemployment}=\frac{\text{Structural + Frictional}}{\text{Labor Force}}\end{array}$$

Put another way, the natural rate of unemployment is the non-cyclical portion of unemployment. For the United States in recent years has often been thought to be 4-5%. When the unemployment rate is equal to the natural rate of unemployment, economists sometimes say that the economy is at full employment.

Measurement

This is not required material for the AP Exam, simply some real life context to how the data is collected.

In the United States, the values we have just defined are measured using two distinct surveys. Each is conducted on a monthly basis by the Bureau of Labor Statistics, part of the Department of Labor.

The Current Employment Statistics survey is a survey of businesses. This is used to track changes in total nonfarm payroll employment.

The Current Population Survey is a monthly survey of households, this is what is used to calculate the unemployment rate. As a part of this demographic data is also collected, allowing for measurement of unemployment rates across various groups.