natural unemployment rate
Natural Rate of Unemployment When national income changes, the amount of employment and that of unemployment change as well. Unemployment follows a cyclical path, increasing during times of recession and decreasing in times of business expansion. The unemployment rate does not, show any important long-term trend over time. In macroeconomics, scholars name between the natural rate of unemployment made up by frictional and structural unemployment and the rate of cyclical unemployment. ... As a result the unemployment rate, which is the differ-ence between the labor force and employment, expressed as a percentage of the labor force has not increased decade by decade. The unemployment rate does change from year to year, because changes in the labor force are not exactly similar to changes in employment. ... During the period of early 1980’s, worldwide unemployment rose to high levels. The unemployment remained at a high rate in many advanced industrial countries, and only be-gan to come down, very slowly, during the later half of the decade. ... Other then these reasons mentioned they can also be clas-sified by location, by occupation, by the span of unemployment, or by the reasons for their unemployment or leaving the job. The recorded figures and facts for unemployment may considerably understate or overstate the estimation in numbers who are actually willing to work at the existing set of wage rates. Normally, overstatement arises because the estimated figure for unemployment includes people who are not interested in work but who say they are unemployed in order to recieve unemployment aid and benefits to take care of their expenses. ... Although these people are not counted in the survey of unemployment (which requires that people actively looking for work), they are unemployed in the sense that they would accept a job if one were available at going wage rates. ... There are three types of unemployment: cyclical, frictional and structural. It is important to mention and notice that a certain combination of frictional and structural unemployment exists even when the national income is at its peak. Together, these two types of unemployment frictional and structural unemployment make up the natural rate of unemployment. Cyclical unemployment can be measured as the number of persons currently employed subtracted by the number of persons who would be employed at po-tential income.