Unemployment

Because of its traumatic effects on those who experience it, unemployment is a matter of widespread concern. Its causes and consequences have been topics of investigation and of controversy in economics, and in psychology and sociology. On some occasions its limitation has been made a policy objective, and on others it has been used as an instrument of policy. Its harm can be mitigated but there is no prospect of its elimination.

Terms

Economics textbooks sometimes refer to four categories of unemployment:

• frictional unemployment, which happens to people who leave one job to search for another;
• structural unemployment, which happens to people whose skills are no longer needed because of changes in technology or industry structure;
• wage-rigidity-, or classical, unemployment, which happens when wages are maintained at a level at which the demand for labour falls short of its supply; and
• demand-deficient-, or Keynesian, unemployment, which occurs in a recession when the demand for labour falls short of its supply for macroeconomic reasons.
  

None of those categories of unemployment can be defined with any precision for statistical purposes, and the term unemployment can itself be defined for those purposes only by drawing some arbitrary distinctions between unemployment and other forms of under-utilisation of labour. International and national statistical definitions have been published, all of which leave some scope for subjective interpretation.

The unemployment rate is the amount of unemployment expressed as a percentage of the labour force.
A discouraged worker is one who has stopped searching for suitable work because he believes that none is available.
The term full employment is usually defined as a situation in which the number of vacancies exceeds the number unemployed, but it may alternatively be taken to mean the absence of unemployment other than frictional and structural unemployment.
The term natural rate of unemployment usually means the same as non-accelerating-inflation rate of unemployment, but it is sometimes used to mean the unemployment rate that rules when the growth rate of the economy is in line with its long-term rate.

Trends

Databases of unemployment statistics trace the historical patterns of unemployed rates by age, gender, age and duration. Differences among national definitions and collection methods make international comparisons hazardous, but approximate comparisons between internationally harmonised rates are also available.

Annual unemployment rates in the larger developed economies have topped 10 per cent during recessions and have usually averaged between 3 and 8 per cent in other years. Annual rates as low as 2 per cent have occurred in Japan and Sweden , but have seldom fallen below 3 per cent elsewhere. Youth unemployment rates of over 15 per cent, and sometimes as high as 30 percent, have occurred in developed economies during recessions, and have typically been 2½ to 4 times the average rate at other times. The percentage of the unemployed that have been out of work for at least a year during 2005/8 has varied from around 10 per cent in the united States to over 50 per cent in Germany