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    Unemployment

    Unemployment refers to the number of individuals who are unemployed and currently able, of age, and searching for work. The unemployment rate is the number of unemployed people expressed as a fraction of the labour force, which is the number of unemployed and employed people. Note that the labour force is different than the population because the population can include people that for example are not of age to work. The unemployment of people who have been out of work for over a year are categorized as long tem. Vacancies are the when there are jobs available that are not filled.

    The causes of unemployment are classified into different groups. The first is called frictional unemployment, which is caused by people transitioning between different jobs and when they are searching for jobs. This is the normal turnover of labour and is voluntary. The second type of unemployment is called structural unemployment and occurs when there is a mismatch between the quantity of labour supplied and quantity of labour demanded. This can be a mismatch between the characteristics of the labour force and the characteristics of the jobs available. The third type is called cyclical unemployment and is neither structural nor frictional. It is caused by the highs and lows of the business cycle, such as unemployment being caused by economic recessions. Seasonal unemployment is when certain industries need employees for a short period of time.

    Even if an economy has full employment, there will still be some level of unemployment that is made up of the different types of cyclical, seasonal, frictional, or structural unemployment. This is what is known as the Natural Rate of Unemployment. It is important to understand how unemployment works in an economy because it relates to human welfare.

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