(Un)employment dynamics

0:00- [Instructor] So let's talk a little bit about what unemployment is and what might drive it to go higher or lower. So when most people hear unemployment, they think of, "Well, who isn't working?" And that is kind of true, but when people come up with the unemployment rate, which is usually given as a percentage, it's actually not calculated by the total number of people not working divided by the population.

0:25Instead, it's typically the people not working, people not working, but looking for a job, but looking for work over the total labor force, so the labor force is people who are working or looking for work, working plus looking for work, and so there are situations where people drop out of the labor force where they're saying, "Hey, I'm never going to get a job."

1:03Or maybe there's just something that keeps them from getting an official job, maybe they have to take care of something at home, which we all know is a job, but it doesn't get tabulated this way, looking for work. Now let's think about some of the things that might drive the unemployment rate higher or lower.

1:21So unemployment going higher, which tends to be something that we do not want. Well, this might be just a lack of demand for labor, lack of demand for labor, and there's a lot of things that could cause that. You could cause it's a weak economy, weak economy. It might be that the labor doesn't have the right skills, not right skills.

1:58It could be that this denominator right over here, that this is going up, so it might be an increase, increase, in labor force, in labor force. It could be a lot of graduates coming out of college. It could be a lot of people coming into that area who are looking for work.

2:19These things would increase both the total labor force and the people looking for work who haven't found it yet, and so that could increase the unemployment percentage. Now, what are things that could cause unemployment to go down, unemployment to go down? Well, that might be the opposite.

2:41People leaving the labor force. Leaving the labor force for various reasons. It could be strong hiring, strong hiring, because there's a lot of demand for labor, people have the right skills, the economy's picking up, people want more output and so that goes down, and there's other things that could drive these.

3:03The government could get involved, create stimulus that drives the economy, and, once again, that might create stronger hiring, et cetera. So this is a very high level of the things that could drive what unemployment is and the things that could drive it up or down at a very high level.