← Principles of Macroeconomics

Unit 4: Unemployment

Who actually counts as jobless, the three different reasons a job search can fail, and why a healthy economy never reaches zero unemployment.

5 topics · 18 questions

Each topic is a path, not a menu: work down it in order and every question builds on the one above. Click any of them to watch the answer draw itself.

Sorting the Population: Employed, Unemployed, and Out of the Labor Force

  1. How it worksWalk me through sorting an entire adult population into employed, unemployed, and out of the labor force.
  2. Worked exampleFind the unemployment rate when 148 million people are employed and 8 million are jobless and actively searching.
  3. Worked exampleFind the labor force participation rate when 260 million adults exist and 165 million are working or job hunting.
  4. Common mistakeWhy doesn't the unemployment rate fall every single time discouraged people give up looking for work?
Your turn1 of 2
Find the unemployment rate when 162 million people are employed and 11 million are jobless and actively searching.

The Three Types of Unemployment

  1. How it worksHow do frictional, structural, and cyclical unemployment each come from a different root cause?
  2. Going furtherWhat happens to structural unemployment once an entire industry gets automated within a few years?
  3. Common mistakeWhy doesn't a healthy, fully employed economy ever push its unemployment rate all the way down to zero?
Your turn1 of 2
A software engineer voluntarily leaves one job to search for a better one and finds a new position within a month. A coal miner loses their job forever as the industry automates and needs retraining for a new field entirely. What two types of unemployment does this describe, respectively?

The Natural Rate of Unemployment and Full Employment

  1. How it worksHow do frictional and structural unemployment add together into the natural rate?
  2. Worked exampleFind cyclical unemployment when the actual unemployment rate is 7.8 percent and the natural rate is 4.9 percent.
  3. Going furtherWhat makes an economy's natural rate itself drift higher or lower over the course of a decade?
  4. Common mistakeWhy isn't the natural rate a floor that unemployment can never fall beneath?
Your turn1 of 2
Find cyclical unemployment when the actual unemployment rate is 8 percent and the natural rate is 4.8 percent.

Discouraged Workers and Hidden Labor-Market Slack

  1. How it worksWalk me through a discouraged worker disappearing out of the unemployment rate entirely by giving up the search.
  2. Common mistakeWhy doesn't a part-time worker who wants full-time hours get counted as unemployed?
  3. Going furtherWhat happens to the measured unemployment rate once discouraged workers start job hunting again in a recovery?
  4. Ties togetherHow does a falling labor force participation rate hide weakness that the headline jobless number misses?
Your turn1 of 2
A labor force of 185 million people includes 13 million unemployed job seekers. If 4 million discouraged workers who want jobs, but are not counted in either the labor force or the unemployment count, started actively job hunting again, what would the new unemployment rate become?

Unemployment Over the Business Cycle

  1. How it worksHow does cyclical unemployment rise as firms cut production during a downturn and fall as they rehire during a recovery?
  2. Going furtherWhat happens to long-term unemployment specifically once a recession stretches past two years?
  3. Ties togetherHow does cyclical unemployment map onto the output gap between actual and potential GDP?
Your turn1 of 2
During a recession, firms across the economy cut production and lay off workers, and during the following recovery, they gradually rehire as production picks back up. What type of unemployment does this rise and fall track most closely?