6: Our identities are often strongly linked with what we do to make money, which we commonly

11: refer to as “jobs.” That's why when we lose our jobs, it can be a serious personal issue.

18: For governments, it may become a national crisis if many citizens lose their jobs. In fact,

24: one of the quickest ways for economists to measure the overall health of an economy

29: is by tracking the number of people who are out of work. While some unemployment always naturally

35: occurs, even in a booming economy, high rates of unemployment can be devastating for a society.

41: In order to determine the unemployment rate, we must first look at the labor force. Again, we will

47: be looking at how the Bureau of Labor Statistics does this in the United States. As we learned in

53: the previous tutorial, people who are not included in the labor force include full-time students,

59: stay-at-home parents, retired people, active military, the institutionalized, and those

65: who have given up looking for employment for an extended period of time. And so, to calculate

71: the unemployment rate, you take the number of unemployed divided by the labor force times 100.

78: For example, if there are 10 million unemployed people in a country and 150 million in the labor

84: force, you'd have an unemployment rate of 6.67%. However, we must understand that unemployment

91: can occur for different reasons. Economists generally look at four categories of unemployment:

97: frictional, structural, cyclical, and seasonal. Frictional unemployment refers to unemployed

105: people who are looking for jobs for the first time or switching jobs. For example, a college student

112: might need some time to find the right position after graduating. Take Harriet, for example.

117: Harriet may have graduated from law school three months ago, but she had to spend that

122: time interviewing with various law firms to find the one that best suits her needs and interests.

128: Another example might be someone who had to quit their job to take care of someone else.

133: Consider Vince. Vince left his sales job two years ago to care for his mother who

138: has a severe disability, but now he is attempting to return to the workforce.

143: Structural unemployment refers to jobs becoming outdated or obsolete

148: due to a company or industry no longer requiring a particular skill set. Structural unemployment

154: occurs when a worker's skills simply don't match the skills needed for the jobs available. For

160: example, a cashier at a grocery store might lose their job when self-checkout lanes are installed.

167: This is Roberto. Even though he's been a cashier for 20 years, his skills are no longer needed as

173: his role has been automated. Another example might be an American auto company moving its

179: assembly manufacturing to another country where labor is less expensive. This is Anna.

185: Anna lost her auto assembly job when her local plant shut down after the company opened a new

191: one in its place in Mexico. If this becomes widespread among American corporations, Anna's

197: skill set is no longer of value in her country. Cyclical unemployment refers to unemployment as

204: a result of a poor economy. During recessions, or downturns in the business cycle, the demand for

211: goods and services goes down. This results in less production, and therefore fewer workers are needed

217: and companies begin to lay off employees. A layoff is a termination of employment for

223: business reasons. This means it's not the worker's fault for losing the job. In fact, many laid-off

230: employees will be rehired when the recession ends and the business cycle resumes an upward trend.

237: Seasonal unemployment happens when industries slow down or shut down for a particular season

243: or make seasonal shifts in their schedules. Some jobs just aren't applicable all year long.

249: For example, if you mow lawns in Minnesota, you'd have a hard time finding lawns to mow in January.

256: Similarly, if you plow snow in Minnesota, you'd have a hard time finding snow to plow

262: in July. Much seasonal unemployment occurs in fields such as agriculture, due to the timing

268: of when crops are harvested. And seasons are not always predictable. Heat, cold, rain, and drought

276: can alter harvest schedules by causing fruits and vegetables to ripen sooner or later than expected.

283: So that's a quick introduction to the four types of unemployment: frictional, structural,

289: cyclical, and seasonal. We must understand that it's not possible to have zero unemployment,

294: even when everything is going great. Many economists agree that a healthy economy usually

300: has an unemployment rate between 4 and 6 percent, although this figure continues to be revised.

306: This is referred to as full employment, meaning that nearly everyone who wants a job has a job.

313: However, it's important to recognize that some workers are forced to take on low-skill, low-wage

319: jobs even though they are qualified for high-skill jobs, simply because those high-skill jobs

325: are scarce. They are what economists refer to as underemployed, or working at a job for which they

333: are overqualified, or working part time when they desire full-time work. There are also discouraged

339: workers, who have stopped searching for employment altogether. Due to these situations,

345: the unemployment rate can be misleading. But one thing is certain. Economists greatly rely on

352: tracking unemployment, as it is a useful indicator for tracking the status of a nation's economy.