Macroeconomics/Definitions of Unemployment

Unemployment has several definitions, one being those members of the population that are actively looking for work and have not found it in a certain period. The International Labour Organization (ILO) defines unemployed people as those who are: not working one hour or more; and actively seeking work; and currently available for work. The main problem with this definition is that people who become disappointed and are no longer actively looking for a job are not counted as unemployed even though they might still want to work. The way unemployment is measured also has several versions. Some are using official payroll numbers of hirings and firings, others use the number of people who apply for unemployment benefits. Other methods include sampling through phone calls, etc that inquire if any able members of the household are unemployed and looking for work. The informal sector of the economy also create problems since these are done mainly by estimates.

Measure of Unemployment

Unemployment is usually expressed as a percentage of the labor force who are currently unemployed. This is known as the unemployment rate. The unemployment rate plays a big role in how economists measure the performance of an economy and is usually used as an indicator of economic activity. Contrary to popular beliefs, the target of the unemployment rate is not going to be zero as if the economy's unemployment rate falls below a certain level- known as the NAIRU (Non Accelerating Inflation Rate of Unemployment) - firms would be competing for labor resources, creating inflammatory pressure.