Unemployment: percentage of people who do not have jobs but are in the labor force

Labor force: number of people in a country that are classified as either employed or unemployed.

Ideal unemployment rate: 4-5%

Not in the labor force:

1. Kids
2. Military Personnel
3. Mentally insane
4. Incarcerated or in prison
5. Retired
6. Stay at home parents
7. Full time student
8. Discouraged workers (look for a job but can't find one)

Types of employment

1. Frictional

• used the words between jobs
• because they choose new opportunities, new choices, new lifestyles, or new educational levels

2. Structural

• technology changing
• associated with lack of skills or declining industry

3. Seasonal

• waiting for the right season to go to work
• ex: Santa Claus, lifeguard, Easter bunny, construction worker

4. Cyclical

• this is unemployment that occurs due to a swing in the economy
• deal with the business cycle 

Full employment: occurs when there's no cyclical employment

Why is unemployment bad?

1. Not enough consumption (GDP)
2. Too much poverty
3. Too much government assistance

Why is unemployment good?

1. There is less pressure to raise wages
2. There's more workers available for future expansions

Okun's law: for every 1% of unemployment above the NRU causes a 2% decline in real GDP.

So if unemployment is 3.5% we're giving up 7%

3.5 x 2 = 7