Question

Why is unemployment so important to an individual and an economy? How is unemployment measured and list four types of unemployment?

Answer 1

The unemployment rate is the figure divided by the number of unemployed in the civilian work force. According to the Bureau of Labor Statistics, not everyone without a job is actually unemployed. Not only do you have to be without a job to be included in the unemployment rate, you have to have been actively searching for work in the last four weeks. If you've been laid off temporarily and are waiting to be called back to the role, you're still counting. If you have given up looking for jobs, the unemployment rate does not count you.

When the unemployment rate hits 6%-7%, the government is anxious, as it did in 2008, and tries to generate jobs by stimulating the economy. It may also extend unemployment compensation to stop worsening the recession. Research suggest that the easiest way to improve the economy is by increasing the unemployment insurance. Monetary policy can be used to minimize unemployment, too.

The U.S. Bureau of Labor Statistics tests jobs and joblessness for people over the age of 16. The unemployment rate is calculated using two different surveys of the labor force.

The Current Population Survey (CPS): a study of 60,000 households is also known as the "household survey" that the CPS conducts. The survey tests the unemployment rate as defined by the ILO.
The Current Employment Statistics Survey (CES): the CES is also known as the "payroll survey" focused on a sample of 160,000 corporations and government agencies covering 400,000 individual workers.

Frictional unemployment applies to first-time unemployed people who move jobs or are searching for work.
Seasonal unemployment happens when people are out of work because of the season, in particular in areas such as agriculture.
Structural unemployment refers to work being obsolete because a particular skillset is no longer required.
Lastly, people are out of work in cyclical unemployment because of the weak economy.