After learning about GDP, let's explore unemployment - another key economic indicator that tells us how well the economy is serving its people.
Unemployment isn't just one thing. Economists identify three distinct types, each with different causes and solutions.
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Can you name one decision that benefits from knowing the different types of unemployment?
Frictional unemployment happens when people are between jobs by choice. They're searching for better opportunities or transitioning careers.
Think of a teacher who quits in June to find a better school position by September. This is normal and healthy!
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Can you think of another example of someone experiencing frictional unemployment?
Structural unemployment occurs when workers' skills don't match available jobs. Technology changes, industries decline, or required skills shift.
A coal miner losing work as the economy shifts to renewable energy faces structural unemployment. Retraining may be needed.
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What's the key difference between frictional and structural unemployment?
Cyclical unemployment rises and falls with economic cycles. During recessions, businesses lay off workers. During booms, they hire more.
This type responds to overall economic conditions rather than individual choices or skill mismatches.
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Which type of unemployment would increase during a recession?
The natural rate of unemployment combines frictional and structural unemployment. It's the unemployment rate when the economy is at full employment.
Even in a healthy economy, some people are always between jobs or retraining. The natural rate is typically 4-6%.
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