Unemployment

Loading the player...

What is 'Unemployment'

Unemployment occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy. The most frequently cited measure of unemployment is the unemployment rate. This is the number of unemployed persons divided by the number of people in the labor force.

BREAKING DOWN 'Unemployment'

Many different variations of the unemployment rate exist with different definitions concerning who is an "unemployed person" and who is in the "labor force." For example, the U.S. Bureau of Labor Statistics' commonly cites the "U-3" unemployment rate as the official unemployment rate but this definition of unemployment does not include unemployed workers who have become discouraged by a tough labor market and are no longer looking for work.
The various schools of economic thought differ on their explanation of the cause of unemployment. Keynesian economics proposes that there is a "natural rate" of unemployment because the skills of laborers and the positions available are slightly out of sync even under the best economic conditions. Neoclassical economics postulates that the labor market is efficient if left alone, but that various interventions, such a minimum wage laws and unionization, put supply and demand out of balance.

RELATED TERMS
  1. Unemployment Rate

    The percentage of the total labor force that is unemployed but ...
  2. Continuing Claims

    Continuing claims refers to unemployed workers that qualify for ...
  3. Full Employment

    A situation in which all available labor resources are being ...
  4. Unemployment Insurance

    A source of income for workers who have lost their jobs through ...
  5. Natural Unemployment

    The lowest rate of unemployment that an economy can sustain over ...
  6. Unemployment Compensation

    Funds paid by the state to unemployed workers who have lost their ...
Related Articles
  1. Markets

    What "Unemployment" Really Means

    Unemployment occurs when a person who is actively searching for employment is unable to find work. The most frequently cited measure of unemployment is the unemployment rate. This is the number ...
  2. Markets

    Understanding the Unemployment Rate

    The unemployment rate is the percentage of people in the labor force who are unemployed but seeking a job.
  3. Markets

    How Labor Force Participation Rate Affects U.S. Unemployment

    While a falling unemployment rate sounds like a good thing, it can actually be indicative of people leaving the labor force because they can't find a job.
  4. Markets

    How The Unemployment Rate Affects Everybody

    Depending on how it's measured, the unemployment rate is open to interpretation. Learn how to find the real rate.
  5. Markets

    Understanding Natural Unemployment

    Natural unemployment is often defined as the lowest rate of unemployment an economy will reach.
  6. Markets

    Macroeconomics: Unemployment

    By Stephen Simpson Labor is a driving force in every economy – wages paid for labor fuel consumer spending, and the output of labor is essential for companies. Likewise, unemployed workers ...
  7. Markets

    U.S. Labor Participation Rate at Record Lows

    In absolute terms, labor participation hit an all-time low.
  8. Markets

    The True Unemployment Rate: U6 Vs. U3

    Learn how to distinguish between the U-3 and U-6 unemployment rates, and explore which rate provides a truer picture of unemployment.
  9. Markets

    Leading Economic Indicators: U.S. Bureau of Labor Monthly Stats

    The Bureau of Labor Statistics' monthly employment figures are a key economic indicator. Here's how they work.
  10. Markets

    Understanding Frictional Unemployment

    Frictional unemployment is one aspect of natural unemployment, which is unemployment caused by things other than an underperforming economy.
RELATED FAQS
  1. Do rising unemployment rates tend to increase or decrease investor sentiment and ...

    Discover whether rising unemployment rates tend to increase or decrease consumer confidence and investor sentiment. Unemployment ... Read Answer >>
  2. How does the U.S. Bureau of Labor Statistics calculate the unemployment rate published ...

    Understand the process used by the U.S. Bureau of Labor Statistics to determine the official unemployment rate for the United ... Read Answer >>
  3. Unemployment resulting from changes in the basic composition of the economy ... ...

    The correct answer is a. An example of structural unemployment is the technological revolution. Computers might have eliminated ... Read Answer >>
  4. Is there a natural rate of cyclical unemployment?

    Learn more about cyclical unemployment and find out about the relationship of cyclical unemployment to the natural unemployment ... Read Answer >>
  5. How does the Bureau of Labor Statistics determine the unemployment rate?

    Learn how estimates of the unemployment rate are made based on monthly surveys of American households that are conducted ... Read Answer >>
  6. What is the difference between structural unemployment and cyclical unemployment?

    Learn more about unemployment in an economy, what structural and cyclical unemployment are, and the differences between these ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center