Labor force—anyone 16 years of age or older that is willing and able to work. Workers cannot be in the military, a full-time student, retired or institutionalized.
Unemployment rate—the percentage of unemployed workers in the total labor force. It is calculated by dividing the number of unemployed by the total number of people in the labor force.
Labor force participation rate—a measure of an economy's active workforce. It is calculated by taking the total number of workers employed or actively seeking employment and dividing by the total number of the non-institutionalized, civilian working-age population.
The natural rate of unemployment—the total amount of frictional and structural unemployment
Frictional unemployment—workers who are temporarily unemployed or currently in between jobs. A specific type of frictional unemployment is known as seasonal unemployment. Seasonal unemployment is a type of frictional unemployment that defines particular types of jobs that can only be done during a certain time of the year. Construction workers in the northern states are considered seasonal during the winter. Lifeguards are another example of seasonal unemployment as they are typically only hired during the summer months.
Structural unemployment—workers who are unemployed because their skills have become obsolete (this means that the skill is no longer needed within the economy). A specific type of structural unemployment is technological unemployment. An example of technological unemployment would be where a company begins to use a machine to complete a production task instead of a worker.
Cyclical unemployment—workers who are unemployed because their jobs have been lost due to economic contraction. These jobs will return when economic conditions improve and grow.
Calculating the Unemployment Rate
Germany's unemployment rate in 2017 would be 10%. That is determined by dividing the 5 million that are unemployed by the 50 million that are in the labor force. Germany's unemployment rate in 2018 is 15%. That is determined by dividing the 15 million that are unemployed by the 100 million that are in the labor force.
Italy's unemployment rate in 2017 is 5%. That is determined by dividing the 8 million unemployed by the 160 million in the labor force. Italy's unemployment rate in 2018 is 7%. That is determined by dividing the 7 million unemployed by the 100 million in the labor force.
Types of Unemployment
Below are some examples of different scenarios related to different types of unemployment: